For business information, annual reports, laws, ordinances, regulations and articles.

Paksearch.com

Search

Web

Paksearch.com
1 5987155224 ISO-8859-1 ISO-8859-1

pub-5263514835

GALT:#0066CC;G en

Muslim Commercial Bank Limited

Annual Report 2001

CONTENTS
Highlights Board of Directors Chairman's Review Directors' Report to the Members Auditors' Report to the Members Balance Sheet Profit & Loss Account Statement of Changes in Equity Cash Flow Statement Notes to the Accounts Annexure 'A' Statements, Under Section 237 l(e), (f) and (g) Progress at a glance Branches Network Pattern of Shareholding Categories of Shareholders Notice of Annual General Meeting Annual Report of Muslim Commercial Financial Services (Private) Limited Annual Report of MNET Services (Private) Limited Consolidated Annual Report of Muslim Commercial Bank and Subsidiary Companies

Highlights
2001 (Rupees in Million) Authorised Capital Paid-up Share Capital Reserve Fund & other Reserves Deposits Advances - net Investments - net Total Assets Pre-tax profit Imports Exports Home Remittances Number of Branches Number of Accounts Number of Employees 3,500 2,423 2,279 154,544 76,586 55,432 187,055 2,101 53,008 34,968 -----------------24,703 ========== 1,061 4,392,164 -----------------11,614 ==========

Corporate Information
Board of Directors: Mian Muhammad Mansha Chairman Mr. S.M. Muneer Vice Chairman Mr. Tariq Rafi Shaikh Mukhtar Ahmed Mr. Mohammad Arshad Mr. Shahzad Saleem Mr. Raza Mansha Mr. Sarmad Amin Mian Umer Mansha *Mr. Mushtaq Ahmed Malik

Mr. Mohammad Aftab Manzoor President & Chief Executive Auditors: A.F. Ferguson & Co., Chartered Accountants M. Yousuf Adil Saleem & Co., Chartered Accountants Legal Advisors: Mandviwalla & Zafar Advocates and Legal Consultants Registered Office: MCB Building, F-6/G6, Jinnah Avenue, Islamabad. Principal Office: Adamjee House, 2nd Floor, I.I. Chundrigar Road, Karachi. Registrar's and Share Registration Office: THK Associates (Pvt.) Ltd., Shares Department, Ground Floor, Sheikh Sultan Trust Building No. 2, Beaumont Road, Karachi.

Chairman's Review
The Board of Directors and the Management of MCB are pleased to announce an excellent performance in year 2001. The year 2001 posed a tough operating environment in which the Bank due to its inherent strengths and hands on management was able to post healthy financial results. Recognizing the various initiatives taken by the Bank, I am pleased to inform our shareholders that the world-renowned financial magazine "Euromoney" has once again awarded MCB their prestigious award for excellence. Our bank has been declared, 'The Best Bank of Pakistan" for 2001 among all local and foreign banks, an up-gradation from the 2000 award. It is a matter of great pride to achieve this global recognition. Economy

The first half of the year was characterised by the impact of deepening international recessionary trends, the Government effort to increase the tax base and document the economy, the deteriorating Pak Rupee exchange rate parity and relatively tight monetary policy. The overall effect of the foregoing resulted in subdued economic activity in the small and medium sector and limited investments being undertaken in the manufacturing sector. In the second half of the year 2001, the State Bank of Pakistan (SBP) relaxed its monetary policy and initiated reducing the discount and Treasury Bill Rates to revive economic activity. Unfortunately, those radical measures could not produce the desired results owing to the sudden terrorist attacks in the US. In the wake of the September 11 attacks on the US, the economic uncertainty increased. The immediate impact, naturally, was significant reduction in economic activity and a wait and see approach as to how events unfold. The focused decision taken by the Government to become a front line state have, as things stand today, mitigated the potential adverse consequences facing Pakistan's economy immediately after September 11. Despite these unavoidable circumstances, MCB, owing to its ability to reasonably remunerate its depositors and being net lender in the inter-bank market, managed to achieve steady growth in most banking activities. Financial Highlights The results for 2001 are reflective of the sustained all-round efforts over the last few years, to maintain profitable growth along with prudent and proactive risk management and expansion of product range for customers. Pre-tax profit for the year 2001 was Rs. 2.10 billion as against Rs. 1.32 billion in 2000 - a healthy increase of 59%. Growth in profitability is primarily due to fund based activities through efficient asset and liability management. Fee based income was lower despite increase in volumes due to competitive pricing and discontinuation of charges on PLS accounts. Administrative expenses grew by 3%, generally attributed to absorb effect of inflation and enhancement in Govt. levies. Pragmatic efforts are, however, under way to manage costs in relation to revenues to further improve the revenue/expense ratio. Higher level of provisions was in line with the Bank's

policy to upfront recognize problem lending. We continue to focus on recovery of non-performing loans. In 2001, the Bank managed to recover Rs. 2.19 billion as against Rs. 1.97 billion in 2000. The balance sheet footings have increased to Rs. 187 billion from Rs. 175 billion primarily based on deposit growth. Deposits have registered a substantial increase of 14% and stand at Rs. 154.5 billion in 2001 as against Rs. 136 billion in 2000. Despite the low PLS deposit rates, branch network has shown a commendable performance by increasing and managing the deposit mix. This has been possible by improvement in customer service and targeted sales of products like ATM cards. Net advances as at December 31, 2001 stood at Rs. 76.6 billion, a reduction of Rs. 9.8 billion. Demand for credit from manufacturing and export clients fell considerably, post September 11, 2001, which led to a reduction in advances as on the Balance Sheet date from a higher level during the year. Furthermore, demand for seasonal financing was lower given the combined impact of delay in the sugar season and fluctuation in cotton prices leading to a delay in purchase of cotton. A number of customers who had built up inventory at low prices off-loaded stocks, at a profit, to repay seasonal financing. Managing Value Creation The multi-pronged strategy that entails a series of initiatives phased over the medium term is yielding positive results. The objective is to attain sustained profitable growth via prudent credit and operational risk management, introduction of new products / services and lowering of the intermediation cost. Areas of focus to achieve the foregoing are: * Emphasis on technology starting from building reliable network connectivity coupled with introduction of electronic banking products. These will provide alternative channels to customers for accessing their accounts round the clock. * New financing products, like Leasing and Consumer Finance, to diversify credit risk and add revenue generating product range to service the growing needs of the customers. Apart from these products, the Bank has rolled out a 'Cash Management' product for its corporate customers. * Rationalise structure, head count and operations to reduce

intermediation cost. This will be under increased focus in the near future given the anticipated shrinking margins and low business volumes. One of the initiatives taken is setting up Foreign Trade processing centres in major cities to improve service and reduce costs. In line with MCB's focus to create and manage value, the Bank's emphasis on new products has yielded positive results. Leadership in Rupee Travellers Cheques: Sales have grown by 26% in the year 2001 and continue to reflect meteoric growth. With the extension of the generic brand, increase in the range of denominations backed by a powerful verification system and over 900 branches involved in this business, our customers continue to increasingly patronise this product, positioning MCB as the market leader by a wide margin. Leadership in ATMs: With over 100 ATMs and 170 online branches, MCB is again an undoubted industry leader with connectivity extended to 16 cities of Pakistan. The online network and the ATMs are planned to grow substantially in 2002. MCB ATMs not only serve as 24-hour cash convenience but also improve on the counter services and turn around time at cash counters. The MCB ATM Master Card with Maestro and Cirrus networks has become a global service furthering the convenience to our customers. Travelling customers access their account from a large number of internationally deployed ATMs and Point of Sale (POS) units. The Bank has experienced a 100% growth in MCB ATM cards in 2001. The MCB ATM card value enhancement continued this year with the introduction of two new services. The Fund Transfer Facility and Mobile Banking. The former allows customers to transfer money to and from any of their nominated MCB accounts anywhere in Pakistan and the latter provides customers the ability to access their mini-account statements and balance information using Mobilink GSM phones. Plans are in the pipeline to expand this to other cellular phone operators in the country. Also it has been decided to make the ATM card a complete debit card in 2002. The MCB ATM cardholders will be able to shop at local merchants via Point of Sale (POS) devices deployed by MCB. The MCB ATM Switch - MNET: the Bank had opened its ATM network facility to other member banks via its switch MNET. The MNET (MCB Network for Electronic

Transactions) launched in 2001 offers an electronic platform for enhanced network accessibility and secure online transactions. The six participating foreign banks have started to use each other's ATMs resulting in an increased convenience to MCB customers and customers of other banks. This year more banks are expected to be added to the MNET switch, which will result in a further increase in ATMs available to customers. To build on the already achieved online connectivity and further improve efficiency, enhance product and service offering capability, the Bank is in the final stages of deciding on changing the core banking technology platform. This will enable the Bank to truly integrate most of its strategic network points on a state-of-the-art technology system. Sectoral Performance Corporate, Investment and Islamic Banking group contributes to catering to the top tier local and multinational companies. The Bank has set up specialised relationship teams to cater to this top tier segment with specific financial needs. The Islamic Banking unit created in the last quarter of 2001 has extended the first Morabaha facility, Sharia compliant and duly approved by the Sharia advisors. This facility is expected to pave the path for the future of Islamic Banking in MCB. Commercial Banking Group manages the core customers of the Bank i.e. middle market and individual depositors. In the year under review, the branches worked tirelessly to increase deposits and to improve risk management. Consumer Banking Group focuses on the Bank's marketing and promotional needs and development of asset and liability products. The group actively liaises with the technology to develop alternate electronic delivery channels to the common customer. MCB has extended its umbrella of consumer financing products with the introduction of personal loans, mortgage and car financing. These asset based products aim to diversify the Bank's lending portfolio, enter new revenue generating avenues, retain existing customers and acquire new ones at acceptable levels of risk. The Treasury and FX Groups have contributed significantly by optimising returns on investments and managing the market risk.

On Human Resources, we continue to induct trainees through an extended management-training program to fulfill the future Human Resource needs of the Bank. The focused training activities are being increased to equip staff for the future. MCB Tower The construction of the Bank's Principal Office and the country's tallest building, named MCB TOWER, is progressing on schedule and is expected to be completed by mid 2003. Apart from cost and work efficiencies that will accrue from all departments housed under one roof, this venture signifies the commitment of the Bank to the country. Future Prospects The year 2002 is expected to pose a more challenging environment than 2001 primarily due to the multifaceted ongoing developments post September 11 and the geopolitical situation, as it exists today. The unfolding of events, post September 11 and the handling of the situation by the Government has to a great degree mitigated the potential derailment of the nascent economic recovery and the economic reform agenda of the last two years. The situational impact of the developments at the banking front, inter-alia, is manifesting in the form of lower margins, reduced demand for credit and enhanced credit risks. In addition to these business impediments, the banking industry is undergoing a phase of consolidation through major mergers and acquisitions. MCB is fully geared to not only maintain its growth pattern but would also increase its share in the industry through the introduction of a series of electronic based products, introduction of Consumer Financing to increase volumes and risk diversification. In the end, I would like to thank our staff and management for their untiring efforts and dedication for ending 2001 at a successful note. I would also like to thank Mr. Shaukat Aziz, Minister of Finance and Economic Affairs and the State Bank of Pakistan for their valuable guidance and support at each stage of our development. Your continued support and dedication brings the Bank one step closer to its mission statement, 'to become the preferred provider of quality financial services in the country with profitability and responsibility and to be the best place to work'.

Mian Moha

Cha

Directors' Report to the Members

The board of directors have pleasure in presenting the 54th annual report to the members for the year ended December 31, 2001 and recommend the following appropriations: (Rupees '000) Profit after taxation Unappropriated profit brought forward Available for appropriation Appropriations: Statutory Reserve Cash dividend @ 12.5% - Interim Proposed cash dividend @ 12.5% - Final 1,108,176 3,185 -----------------1,111,361

Unappropriated profit carried forward

221,635 302,893 302,893 -----------------827,421 -----------------283,940 ==========

Pattern of Shareholding The pattern of shareholding as at December 31, 2001 is annexed with the report. Auditors The retiring auditors M/s A.F. Ferguson & Co., Chartered Accountants and M/s M. Yousuf Adil Saleem & Co., Chartered Accountants, being eligible offer themselves for re-appointment. Acknowledgements The Board of Directors takes the opportunity to place on record their gratitude to the State Bank of Pakistan and Ministry of Finance for their guidance and assistance. The Board also appreciates the efforts and commitment of each and every MCB team member.

On behalf o

Dated: February 14, 2002.

Mian Muha Chairman o

Auditors' Report to the Members

We have audited the annexed balance sheet of Muslim Commercial Bank Limited as at December 31, 2001 and the related profit and loss account, statement of changes in equity and cash flow statement, together with the notes forming part

thereof (here-in-after referred to as the 'financial statements') for the year then ended, in which are incorporated the unaudited certified returns from the branches except for fifty branches which have been audited by us and seven branches audited by auditors abroad and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the bank's Board of Directors to establish and maintain a system of internal control, and prepare and present the financial statements in conformity with approved accounting standards and the requirements of the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984). Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion and after due verification, which in case of loans and advances covered more than 60% of the total domestic loans and advances of the bank, we report that: (a) in our opinion proper books of account have been kept by the bank as required by the Companies Ordinance, 1984 (XLVII of 1984), and the returns referred to above received from the branches have been found adequate for the purposes of our audit; (b) in our opinion: (i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984), and are in agreement with the books of account and are further in accordance with accounting policies consistently applied. (ii) the expenditure incurred during the year was for the purpose of the bank's business; and (iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the bank and the transactions of the bank which have come to our notice have been within the powers of the bank; (c) in our opinion and to the best of our information and according to the explanations given to us the balance sheet, profit and loss account, statement of changes in equity and cash flow statement together with the notes forming part thereof conform with the approved accounting standards as applicable in Pakistan and give the information required by the Banking Companies Ordinance, 1962 (LVII of 1962) and the Companies Ordinance, 1984 (XLVII of 1984), in the manner so required and give a true and fair view of the state of the bank's affairs as at December 31, 2001 and its true balance of the profit, changes in equity and its cash flows for the year then ended; and (d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980) was deducted by the bank and deposited in the Central Zakat Fund established under section 7 of that Ordinance. A.F. Ferguson & Co. Chartered Accountants

M. Yousuf Ad Chartered

Karachi Dated: February 14, 2002.

Balance Sheet as at December 31, 2001

Note 2001 (Rupees '000)

Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments - net Advances - net Other assets Operating fixed assets Deferred tax assets

6 7 8 9 10 11 12 13

21,259,900 3,025,689 15,470,519 55,432,235 76,585,999 11,400,906 3,659,646 220,500 -----------------187,055,394

Liabilities Bills payable Borrowings from financial institutions Deposits & other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities

14 15 16

17

Net Assets

8,097,178 8,946.62 154,544,451 --8,580,119 ------------------180,168,372 -----------------6,887,022 ==========

Represented By Share capital Reserves Unappropriated profit

18

Surplus on revaluation of assets

19

2,423,140 2,278,980 283,940 -----------------4,986,060 1,900,962 -----------------6,887,022 ========== 6,970,924

Contingencies and Commitments Bills for Collection

20

The annexed notes 1 to 41 form an integral part of these accounts. Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

Shaikh Mu Di

Sarm Di

Profit and Loss Account for the year ended December 31, 2001
Note 2001 (Rupees '000) Mark-up/Return/interest Earned Mark-up/Return/Interest Expensed Net Mark-up/Interest Income Provision for diminution in the value of investments Provision against non-performing loans and advances Bad debts written off directly 21 22 17,033,225 7,544,897 -----------------9,488,328 62,064 1,704,944 448,999 -----------------2,216,007 -----------------7,272,321

Net Mark-up/Interest Income after provisions Non Mark-up/Interest Income Fees, commissions & brokerage income Dividend Income Income from dealing in foreign currencies Other Income Total Non-Markup/Interest Income

23

868,637 243,994 687,854 400,140 -----------------2,200,625 -----------------9,472,946

Non Mark-up/Interest Expenses Administrative expenses Other provisions Other charges Total Non-Markup/Interest Expenses Extraordinary and exceptional items

24 11.2 25

7,331,623 40,000 147 -----------------7,371,770 --

Profit Before Taxation Taxation - Current - Prior years - Deferred 26 26 26

Profit After Taxation Unappropriated profit brought forward Profit available for appropriation APPROPRIATIONS: Transfer to: Statutory Reserve Capital Reserve Revenue Reserve Issue of bonus shares -Interim nil (2000: 10%) Reserve for issue of bonus shares - Final nil (2000: 10%) Interim dividend Rs. 1.25 (2000: Nil) per share Proposed Cash dividend Rs. 1.25 per share (2000: Rs. 0.75 per share)

2,101,176 -----------------957,720 -35,280 -----------------993,000 -----------------1,108,176 3,185 -----------------1,111,361

Unappropriated profit carried forward Earnings per share Diluted earnings per share 27

221,635 ----302,893 302,893 -----------------827,421 -----------------283,940 ========== 4.57 ========== 4.57 ==========

The annexed notes 1 to 41 form an integral part of these accounts. Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

Shaikh Mu Di

Sarm Di

Statement of Changes in Equity for the year ended December 31, 2001
CAPITAL RESERVES Share Reserve for issue Premium of Bonus Shares (Rupees '000)

Share Capital

Sta Re

Balance as at December 31, 1999 Profit after taxation for the year ended December 31, 2000 Issue of bonus shares Transferred to Statutory reserve Interim bonus shares issued Final cash dividends paid Transferred to reserve for issue of bonus shares Balance as at December 31, 2000 Profit after taxation for the year ended December 31, 2001 Issue of bonus shares Transferred to Statutory reserve Interim cash dividend paid Proposed cash dividend Transferred to reserve for issue of bonus shares Balance as at December 31, 2001

1,820,541

473,673

182,054

-182,054 -200,260 -------------------2,202,855

-----------------------473,673

-(182,054) ---220,285 -----------------220,285

-220,285 ---------------------2,423,140 ==========

-----------------------473,673 ==========

-(220,285) ----------------------==========

The annexed notes 1 to 41 form an integral part of these accounts. Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

Shaikh Mu Di

Sarm Di

Cash Flow Statement for the year ended December 31, 2001
Note Cash Flow from Operating Activities Profit before taxation Less: Dividend income 2001 (Rupees '000) 2,101,176 (243,994) -----------------1,857,182

Adjustments for non-cash charges

Depreciation Provision against non-performing advances Provision for diminution in the value of investments Provision for diminution in the value of other assets Gain on sale of fixed assets

332,685 1,704,914 62,064 40,000 (33,277) -----------------2,106,416 -----------------3,963,598

(Increase)/Decrease in operating assets Lendings to financial institutions Advances - net Other assets

(4,618,425) 8,068,196 2,608,979 -----------------6,058,750

Increase/(Decrease) in operating liabilities Bills payable Borrowings from financial institutions Deposits Other liabilities

Income tax paid Net cashflow from operating activities Cash Flow from Investing Activities Net investments in available-for-sale securities Net investments in held-to-maturity securities Dividend received Investments in operating fixed assets Investments in subsidiary companies and associated undertakings Sale proceeds of property and equipment disposed of Net cash flow from investing activities Cash Flow from Financing Activities Dividend paid Net cash flow from financing activities Effects of exchange rate changes on cash and cash equivalents Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year

293,735 (7,944,051) 18,554,304 15,840 -----------------10,919,828 -----------------20,942,176 (1,723,084) -----------------19,219,092

(12,825,529) 1,537,639 163,383 (629,621) (195,508) 166,858 -----------------(11,782,778)

(479,562) -----------------(479,562) (193,479) -----------------6,763,273 17,522,316

Cash and cash equivalents at end of the year

28

-----------------24,285,589 ==========

The annexed notes 1 to 41 form an integral part of these accounts. Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

Shaikh Mu Di

Sarm Di

Notes to the Accounts for the year ended December 31, 2001
1. Status and Nature of Business Muslim Commercial Bank Limited is incorporated in Pakistan and is engaged in commercial banking and related services. The bank is listed on all the stock exchanges in Pakistan. The Bank's registered office and principal office are situated at MCB Building, Jinnah Avenue, Islamabad and Adamjee House, I.I. Chundrigar Road, Karachi respectively. The bank operates 1,054 (2000: 1,203) branches inside Pakistan and 7 (2000: 7) branches outside the country (including the Karachi Export Processing Zone Branch). 2. Basis of Presentation In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan has issued various circulars from time to time. Permissible forms of trade-related modes of financing include purchase of goods by banks from their customers and immediate resale to them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these accounts as such but are restricted to the amount of facility actually utilised and the appropriate portion of mark-up thereon. 3. Statement of Compliance These accounts have been prepared in accordance with the directive issued by the State Bank of Pakistan, the requirements of the Banking Companies Ordinance, 1962, Companies Ordinance, 1984 and the accounting standards issued by the International Accounting Standards Committee (IASC) and interpretations issued by Standing Interpretations Committee of the IASC, as adopted in Pakistan. The Securities and Exchange Commission of Pakistan (SECP) has approved adoption of International Accounting Standard 39, Financial Instruments: Recognition and Measurement (IAS 39). As per SECP circular 01 of 2002 dated January 10, 2002, this IAS is applicable for financial periods beginning on or after July 1, 2001. Accordingly, the requirements of this IAS have not been taken into account for the purposes of preparation of these financial statements. 4. Basis of Measurement These accounts have been prepared under the historical cost convention except that certain fixed assets and investments have been included at revalued amounts. 5. Summary of Significant Accounting Policies 5.1.1 Staff retirement and other benefits The bank operates following staff retirement benefit schemes for its employees:

a) For employees who did not opt for the new scheme, the bank operates the following: i) approved contributory provident fund; and ii) an approved gratuity scheme. b) For new employees and for those who opted for the new scheme introduced in 1975 for clerical staff and in 1977 for officers, the bank operates the following: i) an approved funded pension scheme for which monthly contributions are made on the basis of actuarial recommendations. ii) an approved non-contributory provident fund introduced in lieu of the contributory provident fund. c) For AVPs and above cadre and employees in officers' cadre joining after January 1, 2000, the bank operates an approved contributory provident fund. The above benefits are payable to staff on completion of prescribed qualifying period of service. 5.1.2 Employees' compensated absences Liability in respect of compensated absences of employees are accounted for in the period in which these are earned on the basis of actuarial valuation. 5.2 Taxation Current Provision for current taxation is based on taxable income at the current rates of taxation after taking into consideration tax credits and rebates available, if any. Deferred The bank accounts for deferred taxation using the liability method on all significant timing differences. 5.3 Advances Advances are stated net of provision for doubtful debts. Provision for doubtful debts is determined on the basis of Prudential Regulations issued by the State Bank of Pakistan and charged to the profit and loss account. 5.4 Investments In accordance with the requirements of State Bank of Pakistan investments are recorded as follows: - Quoted securities are valued at market values and surplus/deficit arising thereon is kept in a separate account shown in the balance sheet below equity. The surplus/deficit arising on these securities can only be taken to the profit and loss account when actually realised upon disposal. - Unquoted securities are valued at the lower of cost and break-up value on a portfolio basis. Subsequent increases or decreases in the carrying value are charged/credited to income. Break-up value of securities is calculated with reference to the net assets of the investee company as per the latest available audited accounts. Profit and loss on sale of investments is included in income currently. 5.5 Sale and repurchase agreements Securities sold subject to a repurchase agreement (repo) are retained in the financial statements as investments and the counterparty liability is included in borrowings from financial institutions. Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The difference between sale and repurchase price is treated as mark-up/return earned and expensed.

5.6 Operating fixed assets and depreciation Property and equipment, other than land which is not depreciated, are stated at cost or revalued amounts less accumulated depreciation. Capital work-in-progress is stated at cost. Cost of property and equipment of foreign branches includes exchange differences arising on currency translation at year and rates. Depreciation on all property and equipment is charged using the diminishing balance method except for vehicles, computers and carpets which are depreciated using the straight line method in accordance with the rates specified in the fixed assets note. Depreciation on additions to property and equipment during a year is charged for the whole year while no depreciation is charged on property and equipment disposed of during a year. Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalised. Profit and losses on disposal of property and equipment are included in income currently. 5.7 Foreign currencies Assets and liabilities in foreign currencies have been translated into rupees at the rates of exchange approximating those prevailing at the balance sheet date except those covered by forward exchange contracts which are converted at contracted rates. Foreign bills purchased and forward exchange contracts other than those relating to foreign currency deposits are valued at the rates applicable to the respective maturities of relevant foreign bills purchased and foreign exchange contracts. Exchange gains and losses, except those mentioned in note 5.6, are included in income currently. 5.8 Revenue recognition Mark-up/interest on advances and returns on investments are recognised on an accrual basis except mark-up/interest on classified advances which is recognised on receipt basis, in accordance with the Prudential Regulations issued by the State Bank of Pakistan. Commission income is recognised on receipt basis. Dividend income is recognised on declaration of dividend. Financing method is used in accounting for income for lease financing. Under this method, the unearned lease income (excess of the sum of total lease rentals and estimated residual value over the cost of leased assets) is deferred and taken to income over the term of the lease periods so as to produce a constant periodic rate of return on the outstanding net cash investment in lease. Unrealised lease income is suspensed, where necessary, in accordance with the requirements of the State Bank of Pakistan. Gain/losses on termination of lease contracts, documentation charges and other lease income are recognised as income when they are realised. Front end fee is taken to income on a receipt basis. 5.9 Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents comprise of cash in hand and balances with other banks. 5.10 Related Party transactions For the purpose of ascertaining whether a company is associated or not, companies where a director of the bank has been nominated as a director on behalf of the bank have not been considered as associated companies unless the bank has a shareholding in excess of twenty percent in that company or is able to exercise significant influence over that company. Banking transactions with related parties are carried out on commercial terms and conditions. Note 2001

(Rupees '000) 6. Cash and Balances with Treasury Banks In hand - local currency - foreign currencies In transit - local currency - foreign currencies With State Bank of Pakistan in Local currency current account Local currency deposit account Foreign currency deposit account With other central banks Foreign currency current account Foreign currency deposit account With National Bank of Pakistan in local currency

3,484,511 448,639 544,717 82,050

10,866,293 460 2,115,569

174,247 147,212 3,396,202 -----------------21,259,900 ==========

Deposits with State Bank of Pakistan are maintained to comply with their requirements issued from time to time. Deposits with other central banks are maintained to meet their minimum cash reserves and capital requirements pertaining to the foreign branches of the bank. 7. Balances with other Banks In Pakistan - current account Outside Pakistan - current account - deposit account

3,090 1,988,776 1,033,823 -----------------3,025,689 ==========

Deposits represent foreign currency placements made with foreign banks 8. Lendings to Financial Institutions Call money lending Repurchase agreement lending

8.1

9,044,643 6,425,876 -----------------15,470,519 ==========

8.1 Securities held as collateral

Held by

2001 Further

Total

against lending to financial institutions

bank

given as collateral (Rupees '000)

Market Treasury Bills Pakistan Investment Bonds Federal Investment Bonds

5,525,876 600,000 300,000 -----------------6,425,876 ==========

---------------------==========

5,525,876 600,000 300,000 -----------------6,425,876 ==========

Note 9. Investments - net Held by bank

2001 Given as collateral

9.1 Investments by types: Available-for-sale Securities - Market Treasury Bills - Federal Investment Bonds - Pakistan Investment Bonds - Shares in Listed Companies - Shares in Unlisted Companies - NIT Units - Listed Term Finance Certificates - Prize Bonds

9.5

19,417,146 11,243,495 8,689,467 2,944,509 435,035 5,917 392,485 34,315 -----------------43,162,369

2,686,075 2,050,000 -----------------------4,736,075

Held-to-maturity Securities - Federal Government Securities - Provincial Government Securities - Government Compensation Bonds - TFCs, Debentures, Bonds and PTCs - Certificates of Investment

1,363,056 75,965 870,771 3,857,571 500,000 -----------------6,667,363

------------------------

Subsidiaries MNET Services (Pvt) Ltd. Muslim Commercial Financial Services (Pvt) Ltd.

49,975 7,500

---

-----------------57,475 Associated Undertakings Adamjee Insurance Company Ltd. First Women Bank Ltd.

-------------------

943,600 63,300 -----------------1,006,900 -----------------50,894,107

-------------------------------------4,736,075

Less: Provision for diminution in value of investments Surplus/(Deficit) on revaluation of securities (net) Investments (Net of provisions)

9.3 19.2

(1,018,852) 636,790 -----------------50,512,045 ==========

-184,115 -----------------4,920,190 ==========

Note

2001 (Rupees '000)

9.2 Investments by Segments: Federal Government Securities: - Market Treasury Bills - Federal Investment Bonds - Pakistan Investment Bonds - Others - Federal Government Securities - Government Compensation Bonds Provincial Government Securities Subsidiaries and Associated Undertakings Fully Paid-up Ordinary Shares: - Listed Companies - Unlisted Companies Term Finance Certificates, Debentures, Bonds and Participation Term Certificates: - Listed Term Finance Certificates - Unlisted Term Finance Certificates - Debentures, Bonds and Participation Term Certificates Other Investments - N1T Units

9.4

22,103,221 13,293.50 8,689,467 1,363,056 870,771 75,965 1,064,375

9.5

2,944,509 435,035

392,485 315.92 3,541,650

5,917

- Prize Bonds - Certificates of Investment

Less: Provision for diminution in value of investmen Surplus/(Deficit) on revaluation of securities (net) Investments (Net of provisions)

9.3 19.2

34,315 500,000 -----------------55,630,182 (1,018,852) 820,905 -----------------55,432,235 ==========

9.3 Particulars of Provision for Diminution in value of Investments Opening balance Charge for the year Write offs Closing balance

9.7

956,788 62,064 ------------------1,018.85 ==========

9.4 Market Treasury Bills, Federal Investment Bonds and Pakistan Investment Bonds are held with State Bank of Pakistan and are eligible for rediscounting with SBP. 9.5 This includes the bank's subscription towards the paid-up capital of Khushali Bank Limited. 9.6 Market value of quoted investments was Rs. 48,610.838 million (2000: Rs. 34,723.511 million) and book value of unquoted investments was Rs. 6,821.397 million (2000: Rs. 8,387.436 million) 9.7 Provision has been made during the year against the Term Finance Certificates of Bankers Equity Ltd which is in the process of being liquidated. 9.8 Investments include Federal Investment Bonds and Market Treasury Bills amounting to Rs. 232.55 million earmarked by State Bank of Pakistan and National Bank of Pakistan against TT/DD discounting facilities and demand note facilities sanctioned to the bank. Borrowings from financial institutions as referred in note 15.5 is secured through lien on Federal Investment Bonds amounting to Rs. 500 million. 9.9 Certain approved/Government securities are kept with State Bank of Pakistan to meet statutory liquidity requirements calculated on the basis of domestic demand and time liabilities. 9.10 Particulars of investments held in listed companies and modarabas Investee Number of Shares Held Paid up Value per Share

Total v

Listed Shares Adamjee Insurance Company Ltd. A1-Meezan Mutual Fund Ayaz Textile Mills Ltd. Azam Textile Mills Ltd.

15,822,850 2,019,500 225,250 44,411

10 10 10 10

Baig Spinning Mills Ltd. BSJS Balanced Fund Ltd. Business & Industrial Insurance Co. Ltd. Commercial Union Life Assurance Dominion Stock Fund Ltd. E.F.U. Insurance Co. Ltd. Engro Chemicals Pak. Ltd. Fauji Fertilizer Company Limited Fidelity Investment Bank Haydary Construction Ltd. Hubco Power Company Limited I.C.I. Pakistan Ltd. Interasia Leasing Ltd. Kaytex Mills Limited Leglar Nafees Denim Mills Ltd. Lever Brothers Pakistan Limited Lucky Cement Ltd. Mehr Dastagir Textile Mills Ltd. Millat Tractors Ltd. Mirza Sugar Mills Ltd. Musarrat Textile Mills Ltd. Nafees Cotton Mills Ltd. Network Leasing Corporation Limited REDCO Textile Mills Ltd. Resham Textile Mills Ltd. Rupali Polyester Limited Sadiqabad Textile Mills Limited Sakrand Sugar Mills Ltd. Saritow Spinning Mills Ltd. Shell Pakistan Ltd. Shifa International Hospital Towellers Ltd. Trust Leasing Corporation Limited Trust Security & Brokerage Limited Unit Trust of Pakistan P.I.C.I.C. Ltd. Pakistan PTA Limited Pakistan State Oil Corporation Pakistan Telecommunication Limited Sui Northern Gas Pipelines Limited Modaraba Certificates Financial Link Modaraba First A1-Noor Modaraba First Custodian Modaraba First Dadabhoy Modaraba First Elite Capital Modaraba First Mehran Modaraba

397,230 4,879,730 247,500 3,000,000 922,000 307,261 662,445 3,227,400 825,400 1,008,800 5,582,000 5,000 164,500 226,700 1,851,989 150,000 4,000,000 1,617,400 338,976 748,830 3,604,500 232,800 943,500 982,500 28,037 657,545 2,638,261 275,220 295,265 15,000 526,000 2,687,330 94,600 300,000 15,000 2,320,120 15,000 7,211,400 17,008,156 23,819,039

10 10 10 10 10 10 10 10 10 1 10 10 10 10 10 50 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 5,000 10 10 10 10 10

285,500 5,583,270 200,500 436,500 257,500 53,152

10 10 10 10 10 10

Guardian Leasing Modaraba 9.11 Particulars of investments in Term Finance Certificates

332,000

10

Investee Aruj Textile Mills Limited Bankers Equity Limited Cherat Cement Company Limited Fatima Sugar Mills Limited

Number of Certificates Held 1 10 1 1 1 11 13 50 1 500 925 1 2 928 1 200 5

Paid up Value per Certificate 1,479,500 6,206,400 792,367 2,025,000 6,075,000 1,159,344 1,000,000 253,987 99,980 100,000 25,000 5,000 1,912,500 999,800 561,753

Pa v

First International Investment Bank Matiari Sugar Mills Ltd. Orix Leasing Pakistan Limited Pak Arab Refinery Limited

Rai Textile Mills Limited Sui Southern Gas Company Limited Tourism Promotion Services (Pak) Ltd. 9.12 Particulars of investments held in unlisted companies Company Name Percentage of Holding Number of Shares held

Breakup Value of Investment (Rupees '000)

Based on Aud Accounts as a

Shareholding more than 10% Pak Asian Fund Limited Khushali Bank Limited Confidence Financial Services (Pvt) Limited First Women Bank Limited MNET Services (Pvt) Limited Muslim Commercial Financial Services (Pvt.) Limited Shareholding upto 10% Central Depository Co. of Pak. Ltd. Abamco Ltd Avari Hotels Limited Equity Participation Fund

12 17.6 22.22 31.65 99.95 100

1,350,000 300 500,000 6,330,000 4,997,500 750,000

18,009June 30, 2001 300,732December 31,

4,935September 20 34,815December 31, 50,285December 31,

30,397December 31,

1,000,000 572,000 5,298,101 15,000

4,860June 30, 2001 7,001 June 30, 2001 52,981** 5,160June 30, 2000

Shareholding upto 10% National Institution for Facilitation of Technology National Investment Trust Limited Pakistan Agrochemical Storage and Services Corporation Small Business Finance Corporation

238,738 26,400

4,006June 30, 2000 16,379June 2001

2,500 101,062

37,272March 31, 200 13,052June 30, 1999

** These shares had been acquired under buy back agreement with Avari Hotels Ltd. As per the agreement, these shares would be bought back by Avari Hotels Ltd. in future at the rate of Rs 10 per share. The above excludes companies which have nil breakup value and are fully provided in these accounts. 9.13 Details of Bonds and Debentures Bonds and Debentures Terms of redemption Principal Interest

Rate o

- Local Currency Rice Export Corporation of Pakistan Rice Export Corporation of Pakistan Heavy Mechanical Complex Ghee Corporation of Pakistan Public Sector Enterprises Bonds Public Sector Enterprises Bonds Water and Power Development Authority - Foreign Currency

At Maturity Half yearly At Maturity At Maturity At Maturity At Maturity Yearly

Yearly Half yearly Yearly Yearly Yearly Yearly Half yearly

1 1

12.5%

Cu Government of Pakistan Beximco Textile Ltd Beximco Denims Ltd The Bangladesh House Building Finance Corporation Yearly Half yearly Half yearly Yearly Yearly Half yearly Half yearly Yearly 3 months LIBOR + 1% 14% 14% 5.50%

BD BD

BD

Note

2001 (Rupees '000)

10. Advances - net Loans, cash credits, running finances, etc. In Pakistan

73,453,719

Outside Pakistan

4,079,037 -----------------77,532,756 4,969 46,419 -----------------51,388

Net investment in finance lease In Pakistan Outside Pakistan 10.2 Bills discounted and purchased (excluding treasury bills) Payable in Pakistan Payable outside Pakistan

Provision for non-performing advances

10.4

2,643,215 2,611,494 -----------------5,254,709 -----------------82,838,853 (6,252,854) -----------------76,585,999 ==========

Particulars of Advances 10.1.1 In local currency In foreign currencies 71,595,973 4,990,026 -----------------76,585,999 ========== 60,794,851 15,791,148 -----------------76,585,999 ==========

10.1.2 Short Term Long Term

Not later than one year

2001 Later than one and less than five years

Total

No tha y (Rupees '000)

10.2 Net Investment in Finance Lease Lease rentals receivable Residual value

33,675 312 ------------------

31,375 291 ------------------

65,050 603 ------------------

Minimum lease payments Financial charges for future period Present value of minimum lease pa

33,987 (7,385) -----------------26,602 ==========

31,666 (6,880) -----------------24,786 ==========

65,653 (14,265) -----------------51,388 ==========

10.3 Advances include Rs. 13,436.572 million (2000: 12,443.990 million) which have been placed under non-performing status as detailed below:Category of Classification Domestic Overseas Total (Rupees '000) 1,344,996 835,459 1,040,265 10,215,852 -----------------13,436,572 ==========

Pro Re

Other Assets Especially Mentione Substandard Doubtful Loss

1,344,996 834,009 1,037,215 7,306,775 -----------------10,522,995 ==========

-1,450 3,050 2,909,077 -----------------2,913,577 ==========

10,4 Particulars of provision against non-performing advances 2001 General

Special

Total (Rupees '000)

Sp

Opening balance Exchange adjustments Charge for the year Transfer Reversals

Amounts written off Closing balance

4,054,778 (14,564) 1,704,944 503,702 ------------------2,208,646 (58,304) -----------------6,190,556 ==========

566,000 --(503,702) ------------------(503,702) ------------------62,298 ==========

4,620,778 (14,564) 1,704,944 -------------------1,704,944 (58,304) -----------------6,252,854 ==========

10.5 Particulars of write offs: 2001 (Rupees '000) 10.5.1 Against Provisions Directly charged to the Profit & Loss account 58,304 448,999 -----------------507,303

========== 10.5.2 Write Offs of Rs 500,000 and above Write Offs of below Rs 500,000 475,024 32,279 -----------------507,303 ==========

10.5.3 Details of Loan Write Offs of Rs. 500,000 and above In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the Statement in respect of written-off loans or a other financial relief of five hundred thousand rupees or above allowed to a person(s) during the year ended December 31, 2001 is give Annexure-A. However, this write off does not affect the bank's right to recover the debts from these customers. 10.6 Particulars of Loans and Advances to Directors, Associated Companies, etc. Balance as at December 31, 2001

Ma amo adv includin advanc during (Rupees '000)

Debts due by directors, executives or officers of the bank or any of them either severally or jointly with any other persons Debts due by companies or firms in which the directors of the bank are interested as directors, partners or in the case of private companies as members Debts due by subsidiary companies, controlled firms, managed modarabas and other related parties 2001

94,980

--

--

2 (Rupees '000)

11. Other Assets Income/Mark-up accrued on advances and investments - local curren Income/Mark-up accrued on advances and investments - foreign curr Other advances, deposits, advance rent and other prepayments Taxation (payments less provisions) Non-banking assets acquired in satisfaction of claim Branch adjustment account Unrealized gain on forward foreign exchange contracts Stationery and stamps on hand Prepaid exchange risk fee

11.1

2,759,889 518 118,898 6,517,970 227,000 287,864 160,943 27,349 33,832

Other income receivable Receivable from Pension Fund Others

Less: Provision held against other assets

11.2

378,105 60,000 1,205,964 -----------------11,778,332 377,426 -----------------11,400,906 ==========

11.1 The present market values of non-banking assets acquired in satisfaction of claims approximate their carrying values. 11.2 Provisions against other assets Opening balance Charge for the year Closing balance

337,426 40,000 -----------------337,426 ==========

12. Operating Fixed Assets Capital work-in-progress Property and equipment

12.1 12.2

215,387 3,444,259 -----------------3,659,646 ==========

12.1 Capital Work-in-progress Advances to suppliers Civil works Equipments Others

32,645 167,340 7,050 8,352 -----------------215,387 ==========

12.2 Property and Equipment Cost/Revaluation At January 1, 2001 Additions/ (deletions) Reversal due to revaluation Revaluation deficit

Description

Dece 2

Land and Buildings*

3,235,437

193,429

(143,209)

(96,230)

(169,895) Furniture, office equipment and computers Vehicles

1,731,996

223,508 (14,577) 118,703 (58,358) -----------------535,640 (242,830) ========== 315,271 (48,169) ==========

--

--

387,126 -----------------5,354,559 ========== 5,087,457 ==========

------------------(143,209) ========== -==========

------------------(96,230) -========== -==========

2001

2000

* The break-up of land and buildings as separate categories of fixed assets has not been given as in many cases cost of land had been merged with the cost of building at the time of purchase. Land and Buildings (Rupees '000) 12.3 Surplus on Revaluation of Domestic Properties Surplus on revaluation as at January 01, 2001 Less: Deficit arising on revaluation in the current year Less: Realised on disposal of revalued properties during the year 1,188,122 (96,230) (11,835) -----------------1,080,057 ==========

The domestic properties of the bank were revalued and incorporated on December 31, 2001. During the year, valuation was carried out Nanjee & Co., Valuation and Engineering Consultants on the basis of their professional assessment of the market values. At the above d revaluation resulted in a surplus of Rs. 936.848 million over the written down value of Rs. 1,794.690 million of these assets. Of the rev Rs. 885.306 million remains undepreciated at December 31, 2001.

Previously, the domestic properties of the bank were revalued on December 31, 1997 by Iqbal Nanjee & Co., Valuation and Engineerin on the basis of market value. Had there been no revaluation, the written down value of the revalued assets would have been Rs. 1,829.470 million. 12.4 Disposal of fixed assets Description Cost/ Revaluation Accumulated Depreciation (Rupees '000) Land and Buildings Book value

S pro

Property No. F-61, SITE

98,080

23,959

74,121

Al-Riaz & Banglore Co-Operative Housing Society, Karachi Other properties having book value of less than Rs. 250,000 and cost of less than Rs. 1,000,000

71,755

10,235

61,520

60 -----------------169,895

------------------34,194

60 -----------------135,701

Furniture, office equipment and computers Items having book value of less than Rs. 250,000 and cost of less than Rs. 1,000,000 Vehicles

14,577 951 768 1,003

12,017 760 614 802

2,560 191 154 201

907 746 689

726 597 413

181 149 276

314 912 746 1,105 924 604 746 746

63 365 597 221 --597 597

251 547 149 884 924 604 149 149

Other vehicles having book value of less than Rs. 250,000 & cost of less than Rs. 1,000,000

746 -----------------46,451

597 -----------------44,254

149 -----------------2,197

2001 2000

58,358 -----------------242,830 ========== 48,169 ==========

51,203 -----------------97,414 ========== 37,670 ========== Note

7,155 -----------------145,416 ========== 10,499 ========== 2001 (Rupees '000)

13. Deferred Tax Assets Deferred debit arising in respect of Provision for employees' compensated absences

255,780 -----------------255,780 ========== 8,072,295 24,883 -----------------8,097,178 ==========

14. Bills Payable In Pakistan Outside Pakistan

15. Borrowings from Financial Institutions In Pakistan Outside Pakistan

8,548,234 398,390 -----------------8,946,624 ==========

15.1 Particulars of Borrowings from Financial Institutions In local currency In foreign currencies

8,510,464 436,160 -----------------8,946,624 ==========

15.2 Details of Borrowings from Financial Institutions Secured Borrowings from State Bank of Pakistan Export refinance Locally Manufactured Machinery

15.3 15.4

2,390,517 50,464

Others

15.5

Repurchase agreement borrowings Others Unsecured Agent balances Call borrowings

166,667 -----------------2,607,648 4,745,533 37,770 406,997 1,148,676 -----------------1,555,673 -----------------8,946,624 ==========

15.3 The bank has entered into agreements for financing with the State Bank of Pakistan for extending export finance to customers. As per the agreement, the bank has granted SBP the right to recover the outstanding amount from the bank at the date of maturity of the finance by directly debiting the current account maintained by the bank with SBP. 15.4 According to agreements with the State Bank of Pakistan, these loans are obtained for providing finance to customers against locally manufactured machinery. These loans are secured by way of repayment agreements. 15,5 This loan has been arranged for meeting expenditure against administrative restructuring. This loan is secured through lien on Federal Investment Bonds amounting to Rs 500 million. 16. Deposits and other Accounts Customers Fixed deposits Savings deposits Current Accounts - Non-remunerative Margin accounts Others

28,274,809 89,806,592 33,859,944 1,759,135 50,098 -----------------153,750,578

Financial Institutions Remunerative deposits Non-remunerative deposits

790,327 3,546 -----------------793,873 -----------------154,544,451 ==========

16.1 Particulars of Deposits In local currency In foreign currencies

143,415,730 11,128,721 -----------------154,544,451

========== 17. Other Liabilities Mark-up/Return/Interest payable in local currency Mark-up/Return/Interest payable in foreign currency Accrued expenses Proposed dividend Unclaimed dividends Staff welfare fund Provision for employees' compensated absences Payable to pension fund Security deposits received in respect of finance lease Others

6,729,156 83,074 261,057 302,893 5,186 125,900 441,000 -603 631,250 -----------------8,580,119 ==========

18. Share Capital 18.1 Authorized Capital 2001 350,000,000 ========== 2000 350,000,000 ========== 3,500,000 ==========

18.2 Issued, subscribed and paid-up Fully paid-up ordinary shares of Rs. 10/- each 2001 107,130,690 135,183,385 -----------------242,314,075 ========== 2000 107,130,690 Issued for cash 113,154,833 Issued as bonus shares -----------------220,285,523 ========== 1,071,307 1,351,833 -----------------2,423,140 ==========

19. Surplus on Revaluation of Assets 19.1 Surplus on revaluation of Fixed Assets 19.2 Surplus/(Deficit) on revaluation of Securities

1,080,057 820,905 -----------------1,900,962 ==========

20. Contingencies and Commitments 20.1 Direct Credit Substitutes Guarantee in favour of:

Banks and financial institutions 20.2 Transaction-related Contingent Liabilities/Commitments Guarantees in favour of: Government Others Suppliers credit/payee guarantee

81,067

1,846,597 3,720,858 1,723,237 -----------------7,290,692 12,673,340

20.3 Trade-related Contingent Liabilities 20.4 Other Contingencies Claims against bank not acknowledged as debt 20.5 Commitments in respect of forward lending Forward call lending Commitments to extend credit

299,352

1,000,000 27,218,409 -----------------28,218,409

20.6 Commitments in respect of forward exchange contracts Purchase Sale

12,390,837 8,913,849 -----------------21,304,686

20.7 Commitments in respect of operating leases Not later than one year Later than one year and not later than five years

38,205 42,674 -----------------80,879 321,620 527,537 -----------------70,797,582 ==========

20.8 Commitments for the acquisition of operating fixed assets 20.9 Other commitments

20.10 Taxation The income tax assessments of the bank have been finalised up to and including the assessment year 1998-99. Appeal for assessment years 1988-89 to 1998-99 are pending before the appellate authorities against various disallowances. The total disallowances for the assessment years 1992-93 to 1998-99 against provision for bad and doubtful debts and interest suspense amounted to approximately Rs. 3,856.12 million against which the tax liability would amount to approximately Rs. 2,372.267 million. The management considers that provision is not necessary for the aforementioned amount as the bank has been subjected to taxes for exceeding its normal tax liability by adding back interest in suspense and provision for bad and doubtful debts and is hopeful

of a favourable decision in appeals. Accordingly, no provision has been made in these accounts for the above amount. 21. Mark-up/Return/Interest earned On Loans and Advances to Customers Financial Institutions

9,010,377 1,018,405 -----------------10,028,782

On Investments in Available for sale Securities Held to Maturity Securities

5,335,816 776,254 -----------------6,112.07

On Deposits with financial institutions On Securities purchased under resale agreements Others

817,643 74,730 -----------------17,033,225 ==========

22. Mark-up/Return/Interest expensed Deposits Securities sold under repurchase agreements Other short term borrowings Long-Term borrowings Others

6,126,635 718,441 389,199 12,898 297,724 -----------------7,544,897 ==========

23. Other Income Rent on property Net profit on sale of property and equipment Net profit from investment securities Exchange income on import/export bills purchased/negotiated Bad Debts Recovered Others

37,606 33,277 12,935 99,386 20,555 196,381 -----------------400,140 ==========

24. Administrative Expenses Salaries, allowances, etc. Charge for defined benefit plan Charge for defined contribution plan Non-executive directors' fees, allowances and other expenses

4,658,268 456,391 64,894 13

Rent, taxes, insurance, electricity, etc. Legal and professional charges Communications Repairs and maintenance Rentals of operating leases Stationery and printing Advertisement and publicity Donations Auditors' remuneration Depreciation Staff welfare fund Travelling, conveyance and fuel expenses Subscription Entertainment Others

24.1 24.2 12.2

474,549 82,339 120,595 148,146 38,841 146,768 77,805 1,000 14,519 332,685 81,864 196,852 14,915 35,149 386,030 -----------------7,331,623 ==========

24.1 Donations represent amount paid to Aga Khan Development Network. No director or his spouse had any interest in the recipient of donations. 24.2 Auditors' remuneration A.F. Ferguson & Co. 2001 M. Yousuf Adil Saleem & Co.

Total

A.F. F & (Rupees '000) 2,200 986 185

Audit fee Fee for audit of foreign branches Fee for audit of provident, pension, gratuity and other funds Special certifications and sundry advisory services Tax services Out-of-pocket expenses

1,100 --5,409 -319 -----------------6,828 ==========

1,100 -185 4,514 500 406 -----------------6,705 ==========

9,923 500 725 -----------------14,519 ========== 2001 (Rupees '000)

25. Other Charges Penalties imposed by State Bank of Pakistan

147 -----------------147 ==========

26. Taxation For the year Current Deferred

957,720 35,280 -----------------993,000 ------------------993,000 ==========

For prior year(s) Current

Taxes payable outside Pakistan pertaining to the bank's foreign branches amounted to approximately Rs. 193.592 million (2000: Rs. 113.691 million) 26.1 Relationship between tax expense and accounting profit Accounting Profit for the current year Tax rate Tax on income Tax effect on separate block of income Tax effect of computation adjustments Tax charge for the current year 2,101,176 ========== 50% 1,050,588 (111,776) 54,188 -----------------993,000 ==========

27. Earnings per share Profit after taxation attributable to ordinary shareholders

1,108,176 ========== Number of Shares

Weighted average number of shares outstanding during the year

242,314,075 ========== (Rupees) 4.57 ========== 2001 (Rupees '000)

Earnings per share

28. Cash and Cash Equivalents Cash and Balance with Treasury Banks Balance with other banks

21,259,900 3,025,689 ------------------

24,285,589 ========== 29. Staff Strength Total number of employees at the end of the year

11,614 ==========

30. Defined Benefit Plan 30.1 General description For new employees and for those who opted for the new scheme introduced in 1975 for clerical staff and in 1977 for officers, the bank operates an approved funded pension scheme on which monthly contributions are made on the basis of actuarial recommendation. 30.2 Principal actuarial assumptions The latest actuarial valuation was carried out as at December 31, 1999. The projected Unit Credit Actuarial Cost method using the following significant assumptions was used for valuation purposes: - expected rate of increase in salary level - 6% per annum - expected rate of return on investments - 14% per annum The fair value of the assets and liabilities for past services at the valuation date amounted to Rs 2,176.307 million and Rs. 3,171.786 million respectively. In accordance with the actuarial recommendation and as allowed by the transitional provisions of the Revised International Accounting Standard 19 - Employee Benefits, the management had decided to provide for this deficit and the related interest cost over a maximum period of five years commencing from 1998. Accordingly, during the current year a provision of Rs. 249.00 million has been made in these accounts in this respect. Effective January 1, 2000, a new salary package has been introduced for all AVPs and above cadres and new employees in officers' cadre. Under this package these employees will only be entitled to a contributory Provident Fund. 30.3 Movement in payable to defined benefit plan Opening balance Charge for the year Contribution to fund made during the year Closing balance

141,518 456,391 (657,909) -----------------(60,000) ========== June 30, 2001 (Rupees '000)

30.4 Actual return on plan assets

406,225 ==========

31. Defined Contribution Plan The bank operates an approved contributory provident fund for 1,184 employees where contributions are made by the bank and employees at 8.33% of the basic salary each. During the year the bank has contributed Rs. 64.895 million in

respect of this fund. The bank also operates an approved non-contributory provident fund for 10,430 employees who have opted for the new scheme, where contributions are made by the employees at 12% of basic salaries. 32. Remuneration of Directors and Executives The aggregate amount charged in the accounts for remuneration, including all benefits, to the Chief Executive, Directors and Executives of the bank was as follows: President/Chief Executive 2001 2000 Directors 2001 (Rupees '000) Fees Managerial remuneration Retirement benefits Rent and house maintenance Utilities Medical Conveyance -6,939 407 2,201 489 41 243 -----------------10,320 ========== 1 ========== -5,684 390 2,106 468 33 210 -----------------8,891 ========== 1 ========== 13 -----------------------13 ========== 10 ==========

Number of persons

The Chief Executive and certain executives are provided with free use of the bank's maintained cars and household equipment. 33. Maturities of Assets and Liabilities 2001 Over 3 months to one year (Rupees '000) 1,043,735 --21,242,043 33,069,001 472,739 236,061 ------------------56,063,579

Total

Upto three months

Over to fiv

Assets Cash and balances with treasury b Balances with other banks Lending to financial institutions Investments- net Advances - net Other assets Operating fixed assets Deferred tax assets

21,259,900 3,025,689 15,470,519 55,432,235 76,585,999 11,400,906 3,659,646 220,500 -----------------187,055,394

14,201,549 3,025,689 15,470,519 11,650,995 27,725,850 4,973,411 -------------------77,048,013

Liabilities

Bills payable Borrowings from financial instituti Deposits and other accounts* Other liabilities

Net assets

8,097,178 8,946,624 154,544,451 8,277,226 -----------------179,865,479 -----------------7,189,915 ========== 2,423,140 2,278,980 586,833 1,900,962 -----------------7,189,915 ==========

8,097,178 6,754,176 13,377,436 5,830,902 -----------------34,059,692 -----------------42,988,321 ==========

-2,141,984 20,874,692 2,446,324 -----------------25,463,000 -----------------30,600,579 ==========

Share capital Reserves Unappropriated profit Surplus/(Deficit) on revaluation of

* Savings deposits have been classified as maturing over five years as these do not have any contractual maturity. Further, it has been assumed that on a going concern basis these deposits are not expected to fall below the current year's level. 34. Yield/Interest Rate Risk (Yield/Interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is based on settlement date)

Effective Yield/ Interest rate On-balance sheet financial instruments Assets Cash and balances with treasury b Balances with other banks Lendings to financial institutions Investments Advances Other assets

Total Upto three months

2 Exposed to Y Over to o

(Rup

1.79% 5.93% 10.63% 11.83% 11.13% --

21,259,900 3,025,689 15,470,519 55,432,235 76,585,999 4,127,993 -----------------175,902,335

1,692,455 3,025,689 15,470,519 11,650,995 27,725,850 ------------------59,565,508

Liabilities Bills payable Borrowings from financial instituti Deposits and other accounts

-6.23% 4.72%

8,097,178 8,946,624 154,544,451

-6,754,176 3,214,421

Other liabilities

0.00%

On-balance sheet gap

8,277,226 -----------------179,865,479 -----------------(3,963,144) ==========

------------------9,968,597 -----------------49,596,911 ==========

Off-balance sheet financial instruments Forward Lendings Commitments to extend credit Forward outright purchase of secu

9.90% 11.13% 12.02%

1,000,000 27,218,409 450,000 -----------------28,668,409 ------------------28,668,409 ==========

1,000,000 27,218,409 ------------------28,218,409 ------------------28,218,409 ========== 77,815,320 ========== 77,815,320 ==========

Forward borrowings Off-balance sheet gap Total Yield/Interest Risk Sensitivity Gap Cumulative Yield/Interest Risk Sensitivity Gap

Yield Risk is the risk of decline in earnings due to adverse movement of the yield curve. Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates. 35. Currency Risk Assets Liabilities 2001 Off-balance sheet items

Net cur exp

Pakistan Rupee United States Dollar Pound Sterling Deutsche Mark Japanese Yen Euro Other currencies

172,403,624 11,926,052 72,047 12,469 59,430 32,034 2,549,738 -----------------187,055,394 ==========

(Rupees '000) 160,669,525 16,385,969 374,694 5,558 68,650 14,448 2,346,635 -----------------179,865,479 ==========

(3,476,987) 3,163,699 326,128 67,606 (62,408) (11,865) (6,173) ------------------==========

36. Fair Value of Financial Instruments The fair value of traded investments is based on quoted market prices. Fair value of unquoted equity investments is determined on the basis of break-up value of these investments as per the latest available audited accounts. Fair value of fixed term loans, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient

reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market rates for similar instruments. The provision for impairment of loans and advances has been calculated in accordance with the bank's accounting policy as stated in note 5.3. The maturity and repricing profile and effective rates are stated in note 33 and note 34 respectively. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values since assets and liabilities are either short-term in nature or in the case of customer loans and deposits are frequently repriced. 37. Concentration of Credit and Deposits Out of the total financial assets of Rs 175,902 million, the financial assets which were subject to credit risk amounted to Rs 151,606 million. The bank's major credit risk is concentrated in the textile sector. To manage credit risk, the bank applies credit limits to its customers and obtains adequate collaterals. Investments amounting to Rs 49,744 million are guaranteed by the Government of Pakistan. 3.7 Risk management The bank is primarily subject to interest rate, credit and currency risks. The policies and procedures for managing these risks are outlined in notes 37.1.1 to 37.1.4. The bank has designed and implemented a framework of controls to identify, monitor and manage these risks which are as follows: 37.1.1 Interest rate risk management Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market interest rates. The bank has adopted appropriate policies to minimise its exposure to this risk. 37.1.2 Credit risk management Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Credit risk in the bank's portfolio is monitored, reviewed and analysed by the appropriate officials and the exposure is controlled through counterparty and credit limits. Counterparties are allocated to a particular class based mainly on their credit rating. Foreign currency placements are made in approved currencies and government securities. Loans and advances to scheduled banks and financial institutions are usually secured either by Government securities or by demand promissory notes. Cross border exposures are controlled by the bank by considering country/sovereign risk and is updated as and when necessary. These limits are formally reviewed on a periodic basis. 37.1.3 Currency risk management Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in the foreign exchange rates. In order to avoid losses arising from adverse changes in the rates of exchange, the bank's compliance with the limits established for foreign currency position is being regularly monitored by the management. 37.1.4 Exchange risk management The management has set the following objectives for managing the inherent risk on foreign currency exposures: - Maximise the profitability with minimum risk by managing the exposure at desirable level keeping in view strict compliance of regulatory/international standard and bank's internal guidelines. - Identify price sensitivity of foreign currency - Manage appropriate maturity mismatch gaps - Identify warning and stress zone for mismatch gaps

The management has employed different tools in order to manage the inherent risk of product and market, such as compliance of credit limit, monitoring of foreign exchange exposure limit, review of mark to market portfolio and safe settlement etc. 2001 Advances Rupees in '000 37.2 Segment by class of business Textile Commerce/Trade Financial Sector Agribusiness Others Percent Rupees in '000 Deposits

Pe

21,584,000 11,964,939 -9,725,062 33,311,998 -----------------76,585,999 ==========

28% 16% 0% 13% 43% -----------------100% ==========

3,063,292 23,218,657 793,873 24,965,075 102,503,554 -----------------154,544,451 ==========

37.3 Segment by sector Public/Government Private

16,809,078 59,776,921 -----------------76,585,999 ==========

22% 78% -----------------100% ==========

2,415,340 152,129,111 -----------------154,544,451 ==========

38. Geographical Segment Analysis 2001 Profit before taxation Total assets employed Net assets employed (Rupees '000) 6,949,122 176,272 --64,521 ------------------7,189,915 ==========

Conting Comm

Pakistan Asia Pacific (including South Asia Europe United States of America and Can Middle East Others

2,008,601 86,876 --5,699 ------------------2,101,176 ==========

184,065,489 2,513,812 --476,093 ------------------187,055,394 ==========

Total assets employed include intra group items of Rs. nil. 39. Related Party Transactions For the purpose of ascertaining whether a company is associated or not, companies where a director of the bank has been nominated as a director on behalf of the bank have not been considered as associated companies unless the bank has a

shareholding in excess of twenty percent in that company or is able to exercise significant influence over that company. Type of related party 2001 Loans Loans outstanding at beginning of Loans issued during the year Loan repayments during the year Loans outstanding as at end of ye Interest Income earned Directors 2000 (Rupees '000) ---------------------========== -========== ---------------------========== -========== 87,956 18,750 (106,706) ------------------========== 5,465 ========== 2001 Associated Companies

No provision has been recognised in respect of loans given to related parties (2000: nil) Type of related party 2001 Directors 2000 (Rupees '000) Deposits Deposits as at beginning of year Deposits received during the year Deposits repaid during the year Deposits at end of year Interest expense on deposits Other fee income Guarantees issued by the Bank Guarantees received by the Bank 2001 Associated Companies

876 403 (403) -----------------876 ========== 379 ----

475 73,462 (73,061) -----------------876 ========== 25 ----

47,784 9,471,844 (9,305,277) -----------------214,351 ========== 1,237 ----

Directors' remuneration The details of director's remuneration has been given in note 32 to these accounts. 40. Date of Authorisation for issue These financial statements were authorised for issue on February 14, 2002 by the Board of Directors of the Bank. 41. Corresponding Figures These accounts have been presented in accordance with the revised forms of Accounts and Balance Sheet issued under BSD Circular No. 36 dated October 10, 2001. These forms require certain additional disclosures which necessitated certain reclassification and rearrangement. Therefore, corresponding figures have also been reclassified and rearranged for comparison purposes. Mohammad Aftab Manzoor

Shaikh Mu

President and Chief Executive Mohammad Arshad Director

Di

Sarm Di

STATEMENT SHOWING WRITTEN-OFF LOANS OR ANY OTHER FINANCIAL RELIEF OF FIVE HUNDRED THOUSAND RUPEES OR ABOVE PROVIDED DURING THE YEAR ENDED DECEMBER 31, 2001

Name & address of the borrower 1. G.N. Brothers F-267, S.I.T.E., Karachi. 2. N.S. Enterprises F-117, S.I.T.E., Karachi. 3. Shoukat Hussain & Co. 25-Tasmeea Arcade Off Sumroo Street, Siddique Wahab Road, Karachi. 4. Mussarat Textile Mills Ltd. 1st Floor, HBL Building, Circular Road, Faisalabad.

Name Mr. Ghulam. Nabi

NIC No. 518-95-387399

Fa Husban

Ch. A. Majeed

Mr. Abdul Ghafoor

285-38-126162

Haji Khairudd

Mr. Shaukat Hussain

507-93-050552

Mr. M. Ismail

Mr. Akhtar Abbas Mian Ashfaq Ahmed Mian Nadeem Ashfaq Mian Waseem Ashfaq Mr. Muhammad Iqbal Mr. S.M. Anwar Mr. Sikandar Ali Byong Ju Chang Chang Hak Lee Chuk Ho Lieu Han Dong Lee Hyon Ku Lee Hyung Suk Sun Jae Soon Jin Kee Seok Kim Seong Si Won Joo Kim Mr. Aisha Bai Suleman

246-41-086613 244-35-146891 244-66-146894 244-70-146895 24642-087765 246-23-118956 246-42-087765 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 517-31-116415

Mr. Tufail Mu Mr. Muhamm Mr. Ashfaq A Mr. Ashfaq A Mr. Muhamm Mr. Fazal Din Mr. Niaz Ali N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.

5. Daewoo Corporation P.O. Box 50-Kot Ranjeet Sheikhupura

6. International Builders

Mr. Latif Ibra

3rd Floor, Mashriq Centre, G.I., Karachi.

Mrs. Nargis Latif Mr. Hanif Memon Mr. Abdul Jabbar Mst. Biliqis Mr. M. Yousuf Mr. Muhammad Iqbal Mr. Muhammad Saboor Mr. Muhammad Saeed Mr. Muhammad Sadiq Sh. Aftab Razzaq Sh. Tariq Razzaq Sh. Umer Aftab Mr. Akhtar Ali Abbasi Mr. Munawar Ali Abbasi Mr. Safdar Ali Abbasi 75 Borrowers

517-48-257514 501-69-135450 501-88-526002 517-50-116416 508-52-316072 517-43-054316 517-47-120087 51745-187309 517-53-017240 300-47-326630 300-51-920277 300-94-326632 N.A. N.A. N.A. N.A.

Mr. Abu Baka Mr. A. Sattar Mr. Rehmatul Mr. A. Latif Ib Mr. A. Latif

7. Geofman Trading (Pvt) Ltd.

Sh. Muhamma Sh. Muhamma Sh. Muhamma Sh. Muhamma

8. C.C. Factories (Pvt) Ltd SITE., Shuhabpura, Sialkot. 9. Fuqra Enterprises 150-Hotel Metropole, Club Road, Karachi 10. POF Employees (75 Borrowers) 11. Mehran Metal Containers Plot No. 323, Sector 23, Korangi Inds. Area, Karachi 12. Muhammad Qasim 37/3, Sector 11-F, New Karachi. 13. Soomro Transport Co. 34-Jackson Centre, Jackson Bazar, Keamari, Karachi. 14. Malik Ejaz Anwar 23-Aikman Road, GOR-I, Lahore 15. Jamil-ur-Rehman C-791, Sector 16-B, North Karachi. 16. Adnan Naveed (Pvt) Ltd Basti Malook Bahawalpur Road, Multan.

Sh. Abdul Raz Sh. Abdul Raz Sh. Aftab Raz N.A. N.A. N.A. N.A.

Syed Waqar Hussain Mrs. Nasreen Waqar Mr. Ali Waqar Hussain Mr. Muhammad Qasim

518-34-015665 518-78-015666 N.A. N.A.

Mr. S. Shabbi W/o Waqar H N.A. N.A.

Mr. Abdul Khaliq Soomro

N.A.

Mr. Rasool Bu

Malik Ejaz Anwar

027-90-016196

Malik Muham

Mr. Jamil-ur-Rehman

N.A.

Mr. Afzal Ahm

Malik Aftab Ahmed Malik Hakim Khan Malik Muhammad Afzal Malik Safdar Khan Malik Khan Bahadar Malik Lal Khan

326-89-173092 326-55-173812 326-90-156234 326-59-742651 N.A. N.A.

Mr. Lal Khan Mr. Lal Khan Mr. Lal Khan Mr. Lal Khan Mr. Hakim Kh Mr. Hatim Kh

Malik Muhammad Ajmal Mst. Humat Fatima 17. Rashid Jamal 88-Karachi Stock Exchange Karachi. 18. Muneer Corporation 739-741, 7th Floor, Stock Exchange Bldg., Karachi. 19. KTB Industries Chamba House, Lane GOR-I, Lahore. 20. Zaad (Pvt) Ltd. Plot No. CL/9/10/1, Dr. Ziauddin Ahmed Road, Karachi. 21. A1 Murtaza Cotton Inds. Moza Rodu Sultan, Teh. & Distt. Jhang 22. Abaid-ur-Rehman Masood 195-Q, Phase II, DHA Lahore Cantt. 23. Muhammad Yahya Godil Mumtaz Mansion, Sarmad Road, Saddar, Karachi. 24. A1 Kehkashan (Pvt) Ltd. 18-C, 2nd Floor, Block 7, Shabeed-e-Millat Road, Karachi. 25. Punjab Cotton Ginning Fry Abu Dhabi Road 26. Elegant Travels (Pvt) Ltd. 25-Empress Road, Lahore. Mr. Rashid Jamal

N.A. 32645-173087 N.A.

Mr. Khan Bah W/o Khan Bah N.A.

Mr. Amanullah Adam

511-45-039523

Mr. Adnan

Mr. Kamal Liaquat Ali Khan Mr. Tariq Esa Mr. Babar Yazdani Mr. Nazim Dosani Mr. Afzal Rashid

510-70-117824 310-83-223982 274-62-252941 504-28-688407 517-86-049299

Mr. Ashraf Al Mr. Qazi Anw Mr. Ghulam Y N.A. N.A.

Mr. Azhar Hussain Mr. Iftikhar-ul-Hassan Mr. Aftab-ul-Hassan Mr. Abidur Rehman Masud

259-85-151891 259-54415732 259-56-175736 270-38-099790

Malik Bashir Malik Bashir H Malik Bashir H

Ch. Abdul Re

Mr. M. Yahya Godil

515-39-103485

Mr. M. Siddiq

Mr. Ferozuddin Mr. Kamran Feroz Mst. Sartaj Begum Mr. Nadeem Riaz Ch. Abdul Rashid Ch. Muhammad Shafique Mr. Saeed Ahmed C.E. Mr. Naseer Ahmed Mr. Altaf Ahmed Mr. Anwar Abbasi Mr. Nusrat Abbasi Mr. Muhammad Rashid Khan

N.A. 516-88-314206 N.A. 516-57-217726 358-87-622790 41549-025901 N.A. N.A. N.A. N.A. N.A. N.A.

Mr. Riazuddin Mr. Ferozuddi W/o Ferozudd Mr. Riazuddin

Ch. Sardar Mu Ch. Sardar Mu N.A. N.A. N.A. N.A. N.A.

27. Associated Mfg. Int'l Co.

Mr. Muhamm

199-New Timber Market Ravi Road, Lahore. 28. Zeal (Pvt) Ltd. CL/9/10/1 Dr. Ziauddin Road, Karachi. 29. Blazone (Pvt) Ltd. 51-D, Commercial Area Phase-H, DHA, Karachi. 30. Rahopota Fertilizer Agency Liaquat Road, Civil Lines, Hyderabad. 31. Kontaks Universal 11-Nishtar Road, Lahore. 32. Goshi International Bl-4, Hot No. 18, Karim Park, Lahore. 33. Zampex 31-Napier Road, Lahore. 34. Pir Coal Co. V & PO Karooli Peeran, Distt. Chakwal 35. S.T.A. International Room No. 405, 4th Floor, Japan Plaza, M.A. Jinnah Road, Karachi. 36. Noor Flour Mills (Pvt) Ltd. L-21, Block 22, F.B. Area, Karachi. 37. Maroof Farms 367/1-X, Phase III, LCCHS, Lahore Cantt. 38. Salim & Zakaria Plot No. 67, 12/C, Sector North Karachi. 39. Muhammad Shabbir D-120, Block 'B', Mr. Afzal Rashid Mr. Nazam Hussain Dosani 517-86-049299 504-28-688407 N.A. N.A.

Mr. Asif Raza Mir Mrs. Uzma Gillani

274-59-057493 272-44-308689

Mr. Raza Mir W/o Syed Inay

Mr. Abdul Hameed

465-67-045727

Haji Umer Di

Syed Asher Hussain Jaffery

270-88-373895

Syed Athar H

Mr. Muhammad Aslam

265-91-035493

Mr. Hassan D

Mr. Adnan Raees

272-94-563952

Mr. Riasat Hu

Pir Waqar Hussain

221-90-527429

Pir Ejaz Hussa

Mr. Sh. Tahir Hussain

501-92-058565

N.A.

Mr. Abdul Aziz

N.A.

N.A.

Mr. Javed Umar Khan Late

231-48-148854

Mr. Niwazish

Mr. Muhammad Salim Haji Zakaria

N.A. N.A.

Mr. Abdul Sa Haji Rehmatu

Mr. Muhammad Shabbir

N.A.

Mr. Muhamm

North Nazimabad, Karachi 40. Leathermen Pasrur Road, Sialkot 41. Tariq Plastico (Pvt) Ltd. E-25, Platic Market Shah Alam Market, Lahore 42. Razak Sizing Factory H. No. 1532-D/1, T.B. Hospital Road, Multan. 43. Prof. Syed M. Sarwar Zaidi C/o Principal Govt. College for Women, Sadiqabad. 44. Sri Vijaya Stores 205, 4th Cross Street Colombo-II. 45. Wrack Apparels (Pvt) Ltd 137, Maligawatte, Colombo-10, Sri Lanka. Mian Shahbaz Ahmed 300-89-300598

Mian A. Maje

Mr. S.M. Tariq Mr. S.M. Yaqoob Mr. S. Mazhar Mahmood Mr. Abdul Hafeez

265-49-153484 273-53-175619 273-65-026976 322-87-189140

Sh. Salahuddi

Mr. Abdul Ra

Prof. Syed Muhammad Sarwar Zaidi

360-27-342974

Syed Muhamm Akhtar Zaidi

Mr. Karuppai Pillai Mr. Arunachalampillai Ms. Bawani Shanmugam Mrs. R.S. Ganegoda Mr. K. Ganegoda Mr. H.P. Ganegoda Mr. H.M.W Senayake

530262618 432321169

N.A. N.A. N.A. N.A. N.A. N.A. N.A.

N.A. N.A. N.A. N.A.

46. S.A. Traders 195, Central Road, Colombo-12. 47. Leo Group 138, Galee Road, Cloloubo-3

Mr. Shahul Hameed

502933000

Mr. Shahul H

Mr. Omar Enterzam Lebbe Bibi Safoora Lebbe Mr. S. Lulu Lebbe Mr. Risharad Omer Lebbe Mr. K. Lus Fussing

N.A. N.A. N.A. N.A. N.A.

Lebbe Lebbe Lebbe Lebbe N.A.

48.Copenhegan Farms Buwel (Pvt) Ltd., Kariyamaditta, Hambentota, Sri Lanka. 49. Towe Lanka (Pvt) Ltd.

Mr. Farid Abdul Hussain Mr. Hakim Ali Abdul Hussain Mr. Amyn Farid Mr. M. Anver Zakiuddin Mr. Zakiuddin Anverally Mr. Dishard Zaki Anverally

N.A. N.A. N.A. 5177661848 452962080 N.A.

Mr. Abdul Hu Mr. Abdul Hu Mr. Farid N.A. N.A. N.A.

50. Ceylon Tea & General Mart 74-2/5, Dawson Street, Colombo-02.

Total

Statement and Report under sub-section 1(e), (f) and (g) of Section 237 of the Companies Ordinance, 1984
STATEMENTS UNDER SUB-SECTION (1) (e) Muslim Commercial Financial Services (Pvt) Limited

M Servi Li

(a) Extent of the interest of Muslim Commercial Bank Limited (the holding company) in the Equity of its subsidiary as at the end of the financial year of the subsidiary (b) The net aggregate amount of profits/(losses) of the subsidiary company, so far as these concern members of the holding company and have not been dealt with in the accounts of the holding company; (i) for the Financial year ended December 31, 2001 (i) for the previous years but subsequent to the acquisition of the controlling interest by the holding company (c) The net aggregate amount of losses, of the subsidiary company so far as these have been dealt with or provision made for losses in the accounts for the holding company; (i) for the financial year ended December 31, 2001 (ii) for the previous year but subsequent to the acquisition of the controlling interest by the holding company STATEMENT UNDER SUB-SECTION (1) (f) (a) Changes in the holding company's interest in the subsidiary

100%

100%

Rs. 309,707

Rs. 9,992,364

Rs. 8,222,204

--

Nil

Nil

between the end of the financial year of the subsidiary and the end of the holding company's financial year. (b) Any material changes which have occurred between the end of the financial year of the subsidiary and the end of the holding company's financial year in respect of subsidiary's fixed assets, investments, the moneys lent by it and the moneys borrowed by it for any purpose other than that of meeting current liabilities. STATEMENT UNDER SUB-SECTION (1) (g) Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

Nil

Nil N/A

Shaikh Mu Di

Sarm Di

Progress at a Glance

1992

1993

1994

Authorised Share Capital Paid-up Share Capital Reserve Fund & Other Reserves Total Assets (Excluding Contra) Deposits Advances-net Investments-net Imports Exports Home Remittances Pre-tax Profit No. of Branches No. of Employees No. of Accounts

1,000 ========== 576 1,151

2,000 ========== 663 1,210

2,000 ========== 1,118 1,339

62,424 50,013 25,618 24,187 28,329 17,897 2,448 265 ========== 1,288 12,792 3,229,559

75327 62,783 30,753 27,864 32,734 16,931 3,023 346 ========== 1,290 13,768 3311327

98,604 81,452 41,521 36,159 40,889 21,329 4,007 708 ========== 1306 13,892 3,648,705

Branch Network Sector-wise position of Circles/Regions as on December 31, 2001

Number of Branches Commercial-North Lahore East 1. Lahore East 2. Sahiwal 3. Okara Lahore West 4. Lahore City 5. Lahore West 6. Sheikhpura Faisalabad 7. Faisalabad Central 8. Faisalabad City Gujranwala 9. Gujranwala 10. Gujrat 11. Sialkot Islamabad 12. Islamabad 13. Rawalpindi Chakwal 14. Chakwal 15. Jhelum 16. Attock Sargodha 17. Sargodha 18. Jhang 19. Mianwali Peshawar 20. Peshawar 21. Mardan 22. Kohat 23. Swat Muzaffarabad A.K. 646 72 31 22 19 68 19 27 22 63 31 32 94 32 30 32 40 18 22 67 20 20 27 84 29 30 25 94 26 26 20 22 64

24. Muzaffarabad 25. Mirpur A.K. 26. Abbottabad Commercial-South Karachi East 1. Karachi East 2. Karachi North Karachi West 3. Karachi West 4. Karachi South Hyderabad 5. Hyderabad 6. Nawabshah Sukkur 7. Sukkur 8. Larkana Quetta 9. Quetta Rahim Yar Khan 10. Rahim Yar Khan 11. Bahawalpur Multan 12. Multan 13. D.G. Khan 14. Vehari Corporate 1. South Karachi 2. Central Lahore 3. North Islamabad Priority SUMMARY Sector Commercial-North Commercial-South Corporate Priority Total

19 17 28 376 56 27 29 53 26 27 55 30 25 51 28 23 34 34 55 29 26 72 26 26 20 20 10 8 2 12

No. of Brs. 646 376 20 12 1,054

PROVINCE-WISE Province Punjab Sindh NWFP Balochistan Azad J. Kashmir Domestic Overseas Branches EPZ Total OVERSEAS Sri Lanka: Bangladesh: Bahrain:

No. of Brs. 633 232 123 34 32 1,054 6 1 1,061

1. Colombo 1. Dhaka 1. Manama

2. Pettah 2. Chittagong

3. Maradana

Pattern of Shareholding as at December 31, 2001

Number of Shareholders 13723 32068 2786 1832 205 70 43 45 22 14 11 6 7 6 5 5 6 3 6 5 2 6 7 Holding shares From 1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 85001 90001 95001 Shares held To 100 500 1000 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 90000 95000 100000 420686 9879367 2094851 3724254 1448577 872194 769737 1019655 608213 463831 413104 254698 344285 321549 289333 319021 404971 221146 466676 410323 178330 551622 688848 0.1736 4.0770 0.8645 1.5369 0.5978 0.3599 0.3176 0.4207 0.2510 0.1914 0.1704 0.1051 0.1420 0.1326 0.1194 0.1316 0.1671 0.0912 0.1925 0.1693 0.0735 0.2276 0.2842 Percentage

1 1 1 4 2 2 1 1 2 2 2 1 1 2 1 3 2 2 1 2 1 1 1 1 1 1 1 1 1 4 1 1 1 1 1 3 1 1 1 2 1 1 3 1 1 1 2 1

100001 110001 115001 120001 125001 130001 135001 140001 145001 150001 155001 160001 170001 175001 190001 195001 200001 205001 215001 240001 245001 250001 255001 260001 285001 290001 295001 310001 320001 330001 350001 355001 370001 415001 420001 435001 460001 485001 490001 495001 515001 535001 545001 550001 555001 565001 700001 710001

105000 115000 120000 125000 130000 135000 140000 145000 150000 155000 160000 165000 175000 180000 195000 200000 205000 210000 220000 245000 250000 255000 260000 265000 290000 295000 300000 315000 325000 335000 355000 360000 375000 420000 425000 440000 465000 490000 495000 500000 520000 540000 550000 555000 560000 570000 705000 715000

101550 115000 116114 485103 253156 265100 135323 145000 299070 304586 314884 161178 175000 353626 191097 599650 404368 413210 215348 484545 245303 251182 257086 261096 287500 291000 300000 311502 321361 1326732 351288 358838 371790 419435 424452 1306740 463943 486341 495000 995200 518473 535828 1643043 551621 559698 567400 1408060 712529

0.0419 0.0474 0.0479 0.2001 0.1044 0.1094 0.0558 0.0598 0.1234 0.1256 0.1299 0.0665 0.0722 0.1459 0.0788 0.2474 0.1668 0.1705 0.0888 0.1999 0.1012 0.1036 0.1060 0.1077 0.1186 0.1200 0.1238 0.1285 0.1326 0.5475 0.1449 0.1480 0.1534 0.1730 0.1751 0.5392 0.1914 0.2007 0.2042 0.4107 0.2139 0.2211 0.6780 0.2276 0.2309 0.2341 0.5810 0.2940

3 1 1 1 1 1 1 1 1 1 2 1 2 1 1 1 1 1 2 1 1 1 1 4 1 1 1 1 1 2 1 1 1 1 1 1 1 1 -----------------51001 ==========

765001 770001 805001 825001 845001 850001 895001 1045001 1060001 1095001 1110001 1435001 1455001 1480001 1595001 1610001 1940001 1960001 2040001 2170001 2185001 2845001 3055001 3725001 3780001 4075001 4180001 4605001 4615001 5305001 5525001 6655001 9285001 9910001 12230001 19150001 21005001 23995001

770000 775000 810000 830000 850000 855000 900000 1050000 1065000 1100000 1115000 1440000 1460000 1485000 1600000 1615000 1945000 1965000 2045000 2175000 2190000 2850000 3060000 3730000 3785000 4080000 4185000 4610000 4620000 5310000 5530000 6660000 9290000 9915000 12235000 19155000 21010000 24000000

2297882 774642 805975 829631 846582 853437 900000 1047382 1064693 1100000 2221345 1437599 2912982 1484912 1598899 1611841 1942326 1961591 4080801 2173355 2186032 2845816 3055448 14909133 3783742 4077581 4180550 4609141 4616515 10611402 5525348 6658117 9287879 9912228 12234015 19150257 21008606 23995770 -----------------242314075 ==========

0.9483 0.3196 0.3326 0.3423 0.3493 0.3522 0.3714 0.4322 0.4393 0.4539 0.9167 0.5932 1.2021 0.6128 0.6598 0.6651 0.8015 0.8095 1.6840 0.8969 0.9021 1.1744 1.2609 6.1528 1.5615 1.6827 1.7252 1.9021 1.9051 4.3791 2.2802 2.7477 3.8329 4.0906 5.0488 7.9030 8.6699 9.9027 -----------------100.0000 ==========

Categories of Shareholders as at December 31, 2001

Particulars Federal Government Shareholders 1 Shareholding 829631

Perc

State Bank of Pakistan Individual Investment Companies Insurance Companies Joint Stock Companies Financial Institutions Modarabas Foreign Companies Leasing Companies Others Non-Residents (US $) Non-Residents (Pak Rs.) Total

1 46305 11 18 161 43 18 40 5 10 15 4373 -----------------51001 ==========

21008606 75074559 1080784 13262300 69184633 22062765 662028 1877156 188882 35465740 326042 1290949 -----------------242314075 ==========

Notice of Annual General Meeting

Notice is hereby given that the 54th Annual General Meeting of the members of Muslim Commercial Bank Limited will be held at the Registered Office of the Company at MCB Building, F-6/G-6, Jinnah Avenue, Islamabad on Thursday, March 28, 2002 at 4:00 p.m. to transact the following business: 1. To receive, consider and adopt the audited accounts for the year ended December 31, 2001 including post facto approval of donation of Rs. 1.00 M as directed by State Bank of Pakistan under prudential regulation reported at Note 24.1 of annual report, together with the Directors' and Auditors' report thereon. 2. To approve cash dividend @ 12.5% in addition to 12.5% interim cash dividend. 3. To appoint Auditors and fix their remuneration. 4. To transact any other business with the permission of the chair. By Order of the Board Islamabad: March 07, 2002. Notes: 1. The Share Transfer Books of the Company will remain closed from March 22, 2002 to March 28, 2002 (both days inclusive). Dividend will be paid to those members whose names appear on the register of members as at the close of business on March 21, 2002. 2. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint another member as a proxy to attend and vote on his/her behalf. A corporation being a member may appoint as its proxy any of its officers whether a member of the company or not. Proxies, in order to be valid, must be deposited at the office of Share Registrar THK Associates (Pvt.) Ltd., Ground Floor, Sheikh Sultan Trust Building No. 2, Beaumont Road, Karachi, not less than 48 hours before the time of the meeting. 3. CDC shareholders are requested to bring with them their original Passport or National Identity Card along with (Company Secretary)

Participant's I.D. number and their account number at the time of attending the Annual General Meeting in order to facilitate identification of the respective shareholders. 4. Members are requested to promptly notify THK Associates (Pvt.) Ltd., of any change in their addresses to ensure delivery of mail.

Muslim Commercial Financial Services (Pvt) Ltd.

(a fully-owned subsidiary of Muslim Commercial Bank Limited)

Directors' Report to the Members

The board of directors is pleased to present the tenth report to the members for the year ended December 31, 2001 and recommend the following appropriations: Rupees Profit after taxation Unappropriated profit brought forward Profit available for appropriation Proposed cash dividend 100% Unappropriated profit Carried forward 9,992,364 8,222,204 -----------------18,214,568 7,500,120 -----------------10,714,448

During the year there have been important changes in the company's business. As per mutual understanding, the management agreement with Mr. Abdul Kadir Binhendi, to manage Federal Exchange Dubai (FED) has ended.

Due to repatriation of investment made in FED in 1993, the company has earned exchange gain amounting to more than Rs. 16 million The company is also operating as trustee of Unit Trust of Pakistan (UTP), the only private sector open ended fund. Net Profit from the UTP during the year is Rs. 1.33 million which was Rs. 0.98 million last year. The profit after tax Rs. 9.99 million, is two times higher from last year's profit. 100% cash dividend is recommended. The retiring auditors M/s. Hameed Chaudhri & Co., Chartered Accountants, being eligible, offer themselves for re-appointment. The pattern of shareholding as at December 31, 2001 is as under: No. of shareholders 12 1 Shareholdings 1 Share each 750,000 Total shares held 12 750,000

-----------------13 ==========

-----------------750,012 ========== On behalf of the Directors, Abdul Razak H. Adam Chief Executive

Dated: February 04, 2002

Auditors' Report to the Members

We have audited the annexed Balance Sheet of Muslim Commercial Financial Services (Private) Limited as at December 31, 2001 and the related Profit and Loss Account, Cash Flow Statement and Statement of Changes in Equity, together with the notes forming part thereof, for the year then ended, in which are incorporated the unaudited results of Federal Exchange, Dubai, upto 30 November 2001, and we state that we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on the statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management as well as evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) in our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984; (b) in our opinion: (i) the Balance Sheet and the Profit and Loss Account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984 and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied; (ii) the expenditure incurred during the year was for the purposes of Company's business; and (iii) the business conducted, investments made and expenditures incurred during the year were in accordance with the objects of the Company; (c) in our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement and Statement of Changes in Equity, together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984 in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at December 31, 2001 and of the Profit, and its Cash Flows and Changes in Equity for the year ended; and

(d) in our opinion, no Zakat was deductible under Zakat and Ushr Ordinance, 1980.

Karachi: February 04, 2002

Hameed Ch Chartered

Balance Sheet as at December 31, 2001

Note Share Capital Authorised Capital 15,000,000 Ordinary Shares of Rs. 10 each 2001 Rupees

2 Ru

150,000,000 ========== 3 7,500,120

Issued, Subscribed & Paid-up Capital Reserves Foreign entity currency translation Difference on investment Unappropriated Profit

Shareholders' Equity Current Liabilities Due to Holding Company Creditors & Accruals Provision for Taxation Proposed Dividend

-10,714,448 -----------------10,714,448 -----------------18,214,568

-336,171 5,559,195 7,500,120 -----------------13,395,486 -----------------31,610,054 ==========

The annexed notes form an integral part of these accounts. Abdul Razak H. Adam Chief Executive Investments Federal Exchange, Dubai Special Savings Certificates - At Cost

Ali Di

-1,500,000

-----------------1,500,000 Current Assets Profit receivable from Federal Exchange Other receivable from Federal Exchange Accounts receivable Accrued profit on Special Savings Certificates/ Term Deposit Receipts Cash & Bank Balances

1,473,426 -502,061 456,966 27,677,601 -----------------30,110,054 -----------------31,610,054 ==========

These financial statements were approved by the board of directors and authorised for issue on February 04, 2002 and are signed on its behalf by: Abdul Razak H. Adam Chief Executive

Ali Di

Profit and Loss account for the year ended December 31, 2001
Note Income Profit from Federal Exchange Business Income from UTP Profit on Special Savings Certificates Profit on Term Deposit Receipts Other Income Exchange gain 2001 Rupees 1,648,255 3,099,297 360,000 96,493 -16,366,566 -----------------21,570,611

2 Ru

8 9

Expenses Legal & Professional Charges Fees & Subscription Conveyance Charges Auditors' remuneration Audit fee Out of pocket expenses

45,200 10,000 15,445 15,000 1,500 -----------------16,500 --

Zakat

Custodian Charges Other receivable from Federal Exchange written off Fine paid to SECP Miscellaneous expenses

PROFIT BEFORE TAXATION PROVISION FOR TAXATION Current year Prior year

1,772,071 2,939,355 15,000 ------------------4,813,571 -----------------16,757,040

PROFIT AFTER TAXATION UNAPPROPRIATED PROFIT BROUGHT FORWARD

7,540,668 (775,992) -----------------6,764,676 -----------------9,992,364 8,222,204 -----------------18,214,568

APPROPRIATION Proposed Dividend 100% (2000 - Nil) UNAPPROPRIATED PROFIT CARRIED FORWARD EARNINGS PER SHARE 10

7,500,120 -----------------10,714,448 ========== 13.32 ==========

The annexed notes form an integral part of these accounts. Abdul Razak H. Adam Chief Executive

Ali Di

Cash Flow Statement for the year ended December 31, 2001
Note 2001 Rupees

2 Ru

Operating Activities Net cash inflow/(outflow) from operating activities Taxes Paid

11

4,502,960 (2,393,391) -----------------2,109,569 --

Investing Activities Investment in Special Saving Certificates

Dis-investment of Federal Exchange, Dubai

33,079,011 -----------------33,079,011

Financing Activities Due from Holding Company Increase/(Decrease) in Cash and Cash Equivalents 12

(8,045,342) -----------------27,143,238 ==========

The annexed notes form an integral part of these accounts. Abdul Razak H. Adam Chief Executive

Ali Di

Statement of Changes in Equity for the year ended December 31, 2001
Share Capital foreign entity currency translation difference on investment 11,326,955 3,348,200 ------------------14,675,155 ========== Unappropriated Profit

Year ended December 31, 2000 Balance as at January 1, 2000 Foreign entity currency translation difference on investment in Federa Profit for the year Balances as at December 31, 2000

7,500,120 -------------------7,500,120 ==========

4,993,958 -3,228,246 -----------------8,222,204 ==========

Year ended December 31, 2001 Balance as at January 1, 2001 Foreign entity currency translation difference on investment in Federa Profit for the year Proposed Dividend Balances as at December 31, 2001

7,500,120 --------------------7,500,120 ==========

14,675,155 (14,675,155) --------------------==========

8,222,204 -9,992,364 (7,500,120) -----------------10,714,448 ==========

The annexed notes form an integral part of these accounts. Abdul Razak H. Adam Chief Executive

Ali Di

Notes to the Accounts for the year ended December 31, 2001
1. The Company and its Operations 1.1 The company was incorporated on 12 February, 1992 as a Private Limited Company. The principal object of the company is to float, administer and manage modaraba companies, modaraba funds and modarabas. 1.2 The Management agreement with Mr. Abdul Kadir Binhendi, UAE. National, for carrying on business of Exchange Company was terminated during the year. 1.3 The Company acts as trustee of Unit Trust of Pakistan (UTP). 2. Summary of Significant Accounting Policies 2.1 Accounting convention These accounts have been prepared under the historical cost convention. 2.2 Taxation Provision for current taxation is made on the taxable income at the current rate of taxation. 2.3 Investments These are stated at cost. 2.4 Translation of foreign currencies Assets and liabilities in foreign currencies have been converted into Pak Rupees at the exchange rates ruling on the balance sheet date. Exchange gain or loss is included in the income currently. Exchange gain realized on disinvestment of Federal Exchange, Dubai is included in the profit and loss account. 2.5 Presentation - Figures in these accounts have been rounded off to the nearest rupee. - Corresponding figures have been rearranged, wherever necessary, for the purpose of comparison. 3. Issued, subscribed & paid-up capital 750,000 ordinary shares of Rs. 10/- each are held by Muslim Commercial Bank Limited - the holding company, and 12 ordinary shares of Rs. 10 each arc held by the nominees of the holding company. 4. Foreign entity currency translation difference on investment This exchange difference has arisen on conversion of foreign currency amount of investment at the exchange rate prevailing on the balance sheet date in compliance with the requirement of International Accounting Standard (IAS) - 21 'The Effects of changes in Foreign Exchange Rates'. During the year, the Company credited the exchange difference realized on disinvestment of Federal Exchange in the Profit and Loss Account. 2001 Rupees 5. Provision for Taxation Balances as at beginning Provision made during the year 1,187,910

2 Ru

Current year Prior year

Paid during the year Balance as at end

7,540,668 (775,992) -----------------6,764,676 -----------------7,952,586 2,393,391 -----------------5,559,195 ==========

6. Federal Exchange, Dubai Capital

AED. 2,000,000

-==========

7. Cash & Bank Balances Cash in hand Cash at bank - On current accounts - PLS Short Notice Deposits

--

177,601 27,500,000 -----------------27,677,601 ==========

8. Profit from Federal Exchange Business AED 2001 Profit of Federal Exchange Less: Share of Mr. Abdul Kadir Bi Add: 60% share of reserve created out of profit receivable on terminat 152,845 (100,000) 2000 318,949 (127,580) 2001 2,477,261 (1,620,767) Pak Rupees

48,851 -----------------101,696 ==========

------------------191,369 ==========

791,761 -----------------1,648,255 ==========

9. Income from UTP This represents remuneration from Unit Trust of Pakistan (UTP), as a trustee. In terms of trust deed dated 26 April, 1997 the trustee is entitled to a monthly remuneration out of deposited property not exceeding 0.045% per month of the net assets on the last day of such calendar month. 10. Earnings per Share Earnings available to Ordinary Shareholders

9,992,364

========== Weighted average number of Ordinary Shares outstanding as at year end

750,012 ========== 13.32 ==========

Earnings per Share

11. Reconciliation of operating profit to net inflow from operating activities. Profit before taxation Adjustments: Exchange gain Other receivable from Federal Exchange written off

16,757,040 (16,366,566) 2,939,355 -----------------(13,427,211) -----------------3,329,829

(Increase)/Decrease in current assets Profit receivable from Federal Exchange Accounts receivable Accrued profit on SSC/TDR

1,694,088 (227,219) (437,338) -----------------1,029,531

Increase/(Decrease) in current liabilities Increase in creditors & accruals Net cash inflow from operating activities

143,600 -----------------4,502,960 ==========

12. Analysis of Cash & Cash Equivalents 2001 Rupees Cash in hand Cash at Bank in current accounts Deposits in NDR -177,601 27,500,000 -----------------27,677,601 ========== 2000 Rupees 445 533,918 ------------------533,918 ==========

Ch Ru

13. Financial Instruments and Related Disclosures

13.1 Interest Rate Risk Exposure The company's exposure to interest rate risk on its financial assets and liabilities as at year end are summarized as follows: 2001 RUPEES INTEREST BEARING upto one year Financial Assets Special saving certificates Profit receivable from F.E., Dubai Other receivable from F.E., Dubai Accounts receivable Accrued profit on SSCs/TDRs Cash & Bank Balances -----27,500,000 -----------------27,500,000 ========== more than one year 1,500,000 ----------------------1,500,000 ==========

sub-total 1,500,000 ----27,500,000 -----------------29,000,000 ==========

up y

Financial Liabilities Due to Holding Company Creditors & Accruals Proposed Dividend

On-Balance Sheet Gap

--------------------------------------27,500,000 ==========

--------------------------------------1,500,000 ==========

--------------------------------------29,000,000 ==========

13.2 Effective Interest Rates Rupees 2001 FINANCIAL ASSETS PLS Short Notice Deposits Special Savings Certificates 13.3 Concentration of Credit Risks The company believes that it is not exposed to major concentration credit risk. 13.4 Fair Value of Financial Instruments The carrying value of all financial instruments reflected in the financial statements approximates their fair values. Abdul Razak H. Adam Chief Executive

Ru 2

4.75% 12%

Ali Di

MNET Services (Private) Limited

(a fully-owned subsidiary of Muslim Commercial Bank Limited)

Directors' Report to the Members

The board of directors is pleased to present the first report to the members for the period ended December 31, 2001. The Company was incorporated on September 07, 2001 so the accounts cover a period of 31/2 months. During the period profit after taxation was Rs. 312,457. MNET Services (Pvt.) Limited was incorporated as a subsidiary company of Muslim Commercial Bank Limited. MNET specializes in eNetworking value added network and premium internet based services. MNET shall deliver an electronic platform of corporate backbone data network for enhanced network accessibility and secure transactions enabling financial institutions and other corporates in Pakistan to meet the increasing demands of their customers. MNET's current projects include corporate backbone data network, revamping of the MCB's official website, setup of a fully functional call centre and the development of a CRM (Customer Relationship Management) database. The financial institutions and other corporates can avail the opportunity to outsource their specific networking and web related operations to MNET, which offers them with an array of eNetworking services. Advancements in technology and internet access means that these services can be provided in a seamless manner without compromising the security or confidentiality aspect of customer information. MNET clients can save the upfront costs of implementing these services, the ongoing costs, resource constraints and risks associated with the maintenance/management of these services. MNET continuously plans to invest in building a robust, reliable, scalable and resilient suite of eNetworking solutions. It has a team of professionals specializing in high caliber skills. This combination will secure MNET's capability for gathering customers' requirements and the ability to deliver the services and solutions within tightly controlled timeframe. The retiring auditors M/s. A.F. Ferguson & Co., Chartered Accountants, being eligible offer themselves for re-appointment. The pattern of shareholding as at December 31, 2001 is as under: No. of shareholders 5 1 -----------------6 ========== Shareholdings 500 share each 4,997,500 shares Total shares held 2,500 4,997,500 -----------------5,000,000 ==========

On behalf of the directors JAVED Y. ADHI Chief Executive

Dated: February 04, 2002.

Auditors' Report to the Members

We have audited the annexed balance sheet of MNET Services (Private) Limited as at December 31, 2001 and the related income and expenditure account together with the notes forming part thereof, for the period from September 7 to December 31, 2001, and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the requirements of the-Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements. based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) in our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984; (b) in our opinion: (i) the balance sheet and income and expenditure account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies stated: (ii) the expenditure incurred during the period was for the purpose of company's business; and (iii) the business conducted, investments made and the expenditure incurred during the period were in accordance with the objects of the company; (c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet and income and expenditure account together with the notes forming part thereof give the information required by the Companies Ordinance, 1984 in the manner so required, and respectively give a true and fair view of the state of the company's affairs as at December 31, 2001 and of its income for the period then ended; and (d) in oar opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.

Karachi: February 04, 2002

A.F. Ferg Chartered

Balance Sheet as at December 31, 2001

Note 2001

Rupees Assets Capital work-in-progress Current assets Interest receivable Cash and bank balances 21,000

942,084 49,610,020 -----------------50,552,104

Current Liabilities Accrued expenses Provision for taxation

NET ASSETS

10,000 253,397 -----------------263,397 -----------------50,309,707 ==========

Represented By Share capital Excess of income over expenditure carded forward

50,000,000 309,707 -----------------50,309,707 ==========

The annexed notes form an integral part of these accounts. Javed Y. Adhi Chief Executive

Aa Di

Income and Expenditure Account for the period from September 7, 2001 to December 31, 2001
Note Income Interest income Expenditure Preliminary expenses Auditors' remuneration Stationery and bank-charges 2001 Rupees 942,084

368,585 10,000 395 -----------------378,980 563,104

Excess of income over expenditure before taxation

Provision for taxation Excess of income over expenditure after taxation carried forward

253,397 -----------------309,707 ==========

The annexed notes form an integral part of these accounts. Javed Y. Adhi Chief Executive

Aa Di

Notes to the Accounts for the period from September 7, 2001 to December 31, 2001
1. Status and Nature of Business MNET Services is a private limited company incorporated under the Companies Ordinance, 1984 on September 07, 2001. The core objective of the company is to provide services in Information Technology and to develop computer softwares and other data processing equipment for planning, designing, management and execution of all types of financial, personal, organisational and institutional activities. Currently, the company has applied for a licence from the Pakistan Telecommunication Authority, to establish and operate a system to provide non-voice communication network services to its prospective clients. As the company has commenced its operations from September 07, 2001, no comparative information has been disclosed in these accounts. 2. Basis of Presentation These account have been prepared in accordance with the requirements of the Companies Ordinance, 1984. 3. Summary of Significant Accounting Policies 3.1 Accounting convention These accounts have been prepared under the historical cost convention. 3.2 Taxation Provision for current taxation is based on taxable income at the current rates of taxation, after taking into account applicable tax credits and tax rebates available, if any, or one-half percent of turnover, whichever is higher. 2001 Rupees 49,595,640 14,380 -----------------49,610,020 ==========

4. Cash and Bank Balances With banks - in savings account - in current account

5. Share Capital

Authorized Capital 2001 10,000,000 Ordinary shares of Rs. 10 each ========== Issued, subscribed and paid-up capital Fully paid-up ordinary shares of Rs. 10 5,000,000 each issued for cash ========== 10,000,000 ==========

5,000,000 ==========

4,997,500 ordinary shares are held by Muslim Commercial Bank Limited - the holding company, and 2,500 ordinary shares of Rs. 10 each are held by the nominees of the holding company. Javed Y. Adhi Chief Executive

Aa Di

Muslim Commercial Bank Ltd.

(Consolidated Accounts of Muslim Commercial Bank Limited and Subsidiary Companies)

Auditors' Report to the Members

We have examined the annexed consolidated financial statements comprising consolidated balance sheet of Muslim Commercial Bank Limited and its subsidiaries, Muslim Commercial Financial Services (Private) Limited and MNET Services (Private) Limited as at December 31, 2001 and the related consolidated profit and loss account, consolidated statement of changes in equity and consolidated cash flow statement, together with the notes forming part thereof for the year ended December 31, 2001. We have also expressed separate opinions on the financial statements of Muslim Commercial Bank Limited and MNET Services (Private) Limited while the financial statements of Muslim Commercial Financial (Private) Limited, have been audited by another firm of Chartered Accountants, whose report has been furnished to us and our opinion in so far as it relates to the amounts included for such company, is based solely on the report of such auditor. It is the responsibility of the Holding Company's Board of Directors to establish and maintain a system of internal control, and prepare and present the financial statements in conformity with approved accounting standards and the requirements of the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984). Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the financial statements. An audit also includes assessing accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the financial statements. We believe that our audit

provides a reasonable basis for our opinion. In our opinion the annexed consolidated financial statements present fairly the financial position of Muslim Commercial Bank Limited and its subsidiaries as at December 31, 2001 and the results of their operations, changes in equity and cash flows for the year then ended in accordance with approved accounting standards as applicable in Pakistan. A.F. Ferguson & Co. Chartered Accountants Karachi Dated: February 14, 2002

M. Yousuf Ad Chartered

Consolidated Balance Sheet as at December 31, 2001

Note Assets Cash and balances with treasury banks Balances with other banks Lendings to Financial Institutions Investments - net Advances - net Other assets Operating fixed assets Deferred tax assets 2001 (Rupees '000) 6 7 8 9 10 11 12 13 21,287,400 3,075,463 15,470,519 55,376,260 76,585,999 11,398,468 3,659,667 220,500 -----------------187,074,276

Liabilities Bills payable Borrowings from financial institutions Deposits & other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities

14 15 16

17

Net Assets

8,097,178 8,946,624 154,544,437 --8,580,465 ------------------180,168,704 -----------------6,905,572 ==========

Represented By Share capital Reserves Unappropriated profit

18

2,423,140 2,278,980 302,465

Surplus on revaluation of assets Minority Interest

19

-----------------5,004,585 1,900,962 25 -----------------6,905,572 ========== 6,970,924

Contingencies and Commitments Bills for Collection The annexed notes 1 to 41 form an integral part of these accounts. Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

20

Shaikh Mu Di

Sarm Di

Consolidated Profit and Loss Account for the year ended December 31, 2001
Note 2001 (Rupees '000) Mark-up/Return/Interest Earned Mark-up/Return/Interest Expensed Net Mark-up/Interest Income Provision for diminution in the value of investments Provision against non-performing loans and advanc Bad debts written off directly 9.3 10.4 10.5 21 22 17,034,263 7,544,897 -----------------9,489,366 62,064 1,704,944 448,999 -----------------2,216,007 -----------------72,733,659

Net Mark-up/Interest Income after provisions Non Mark-up/Interest Income Fee, commission and brokerage income Profit from Federal Exchange business Income from UTP Dividend income Income from dealing in foreign currencies Other Income Total Non-Markup/Interest Income

23

868,637 1,648 3,099 243,994 704,221 400,500 -----------------2,222,099 ------------------

9,495,458 Non Mark-up/Interest Expenses Administrative expenses Other provisions Other charges Total Non-Markup/Interest expenses Extraordinary and exceptional items Profit Before Taxation Taxation - Current - Prior years - Deferred 26 26 26 24 11.2 25 7,336,815 40,000 147 -----------------7,376,962 ------------------2,118,496 965,514 (776) 35,280 -----------------1,000,018 -----------------1,118,478 11,408 -----------------1,129,886

Profit After Taxation Unappropriated profit brought forward Profit available for appropriation APPROPRIATIONS: Transfer to: Statutory Reserve Capital Reserve Revenue Reserve Issue of bonus shares -Interim nil (2000: 10%) Reserve for issue of bonus shares - Final nil (2000: 10%) Interim dividend Rs. 1.25 (2000: Nil) per share Proposed Cash Dividend Rs. 1.25 per share (2000: Rs. 0.75 per share)

Unappropriated profit carried forward Earnings per share Diluted earnings per share 27

221,635 ----302,893 302,465 -----------------827,421 -----------------302,465 ========== 4.62 ========== 4.62 ==========

The annexed notes 1 to 41 form an integral part of these accounts. Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

Shaikh Mu Di

Sarm Di

Consolidated Statement of Changes in Equity for the year ended December 31, 2001
CAPITAL RESERVES Share Reserve for issue Premium of Bonus Shares (Rupees '000) Balance as at December 31, 1999 Profit after taxation for the year ended December 31, 2000 Issue Of bonus shares Transferred to Statutory reserve Interim bonus shares issued Final cash dividends paid Transferred to reserve for issue of bonus shares Balance as at December 31, 2000 Profit after taxation for the year ended December 31, 2001 Issue of bonus shares Transfer to Statutory reserve Interim cash dividend paid Proposed cash dividend Transferred to reserve for issue of bonus shares Balance as at December 31, 2001 1,820,541 473,673 182,054

Share Capital

Sta Re

-182,054 -200,260 -------------------2,202,855

--

-(182,054) ---220,285 -----------------220,285

---------------------473,673

-220,285 ---------------------2,423,140 ==========

-----------------------473,673 ==========

-(220,285) ----------------------==========

The annexed notes 1 to 41 form an integral part of these accounts. Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

Shaikh Mu Di

Sarm Di

Consolidated Cash Flow Statement for the year ended December 31, 2001

Note Cash Flow from Operating Activities Profit before taxation Less: Dividend income

2001 (Rupees '000) 2,118,496 (243,994) -----------------1,874,502

Adjustments for non-cash charges Depreciation Provision Against Non-performing Advances Provision for diminution in the value of investments Provision for diminution in the value of other assets Gain on sale of fixed assets

332,685 1,704,944 62,064 40,000 (33,277) -----------------2,106,416 -----------------3,980,918

(Increase)/Decrease in operating assets Lendings to financial institutions Advances - net Others assets

(4,618,425) 8,068,196 2,603,961 -----------------6,053,732

Increase/(Decrease) in operating liabilities Bills Payable Borrowings from financial institutions Deposits Other liabilities

Income tax paid Net cash flow from operating activities Cash Flow from Investing Activities Net investments in available-for-sale securities Net investments in held-to-maturity securities Dividend received Investments in operating fixed assets Investments in associated undertakings Sale proceeds of property and equipment disposed off

293,735 (7,944,051) 18,554,290 15,994 -----------------10,919,968 -----------------20,954,618 (1,725,478) -----------------19,229,140

(12,825,529) 1,554,352 163,383 (629,642) (145,533) 166,858

Net cash flow from investing activities Cash Flow from Financing Activities Proceeds from issue of capital of subsidiary Dividend paid Net cash flow from financing activities Effects of exchange rate changes on cash and cash equivalents Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 28

-----------------(11,716,111)

25 (479,562) -----------------(479,537) (193,479) -----------------6,840,013 17,522,850 -----------------24,362,863 ==========

The annexed notes 1 to 41 form an integral part of these accounts. Mohammad Aftab Manzoor President and Chief Executive Mohammad Arshad Director

Shaikh Mu Di

Sarm Di

Notes to the Accounts for the year ended December 31, 2001
1. The Group and its Operations The group consists of: - Muslim Commercial Bank Limited - Muslim Commercial Financial Services (Private) Limited - MNET Services (Private) Limited Muslim Commercial Bank Limited is incorporated in Pakistan and is engaged in commercial banking and related services. The bank is listed on all the stock exchanges in Pakistan. The Bank's registered office and principal office are situated at MCB Building, Jinnah Avenue, Islamabad and Adamjee House, I.I. Chundrigar Road, Karachi respectively. The bank operates, 1,054 (2000: 1,203) branches inside Pakistan and 7 (2000: 7) branches outside the country (including the Karachi Export Processing Zone Branch). The financial statements of Muslim Commercial Financial Services (Private) Limited and MNET Services (Private) Limited have been consolidated based on their audited accounts as at December 31, 2001.

2. Basis of Presentation In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan has issued various circulars from time to time. Permissible forms of trade-related modes of financing include purchase of goods by banks from their customers and immediate resale to them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these accounts as such but are restricted to the amount of

facility actually utilised and the appropriate portion of mark-up thereon.

3. Statement of Compliance These accounts have been prepared in accordance with the directives issued by the State Bank of Pakistan, the requirements of the Banking Companies Ordinance, 1962, Companies Ordinance, 1984 and the accounting standards issued by the International Accountin Standards Committee (1ASC) and interpretations issued by Standing Interpretations Committee of the IASC, as adopted in Pakistan. The Securities and Exchange Commission of Pakistan (SECP) has approved adoption of International Accounting Standard 39, Financial Instruments: Recognition and Measurement (IAS 39). As per SECP circular 01 of 2002 dated January 10, 2002, this IAS is applicable for financial periods beginning on or after July 1, 2001. Accordingly, the requirements of this IAS have not been taken into account for the purposes of preparation of these financial statements. 4. Basis of Measurement These accounts have been prepared under the historical cost convention except that certain fixed assets and investments have been included at revalued amounts. 5. Summary of Significant Accounting Policies 5.1.1 Staff retirement and other benefits The bank operates following staff retirement benefit schemes for its employees: a) For employees who did not opt for the new scheme, the bank operates the following: i) approved contributory provident fund; and ii) an approved gratuity scheme. b) For new employees and for those who opted for the new scheme introduced in 1975 for clerical staff and in 1977 for officers, the bank operates the following: i) an approved funded pension scheme for which monthly contributions are made on the basis of actuarial recommendations. ii) an approved non-contributory provident fund introduced in lieu of the contributory provident fund. c) For AVPs and above cadre and employees in officers' cadre joining after January 1, 2000, the bank .operates an approved contributory provident fund. The above benefits are payable to staff on completion of prescribed qualifying period of service. 5.1.2 Employees' compensated absences Liability in respect of compensated absences of employees are accounted for in the period in which these are earned on the basis of actuarial valuation. 5.2 Taxation Current Provision for current taxation is based on taxable income at the current rates of taxation after taking into consideration tax credits and rebates available, if any. Deferred The bank accounts for deferred taxation using the liability method on all significant timing differences.

5.3 Advances Advances are stated net of provision for doubtful debts. Provision for doubtful debts is determined on the basis of Prudential Regulations issued by the State Bank of Pakistan and charged to the profit and loss account. 5.4 Investments In accordance with the requirements of State Bank of Pakistan investments are recorded as follows: - Quoted securities are valued at market values and surplus/deficit arising thereon is kept in a separate account shown in the balance sheet below equity. The surplus/deficit arising on these securities can only be taken to the profit and loss account when actually realised upon disposal. - Unquoted securities are valued at the lower of cost and break-up value on a portfolio basis. Subsequent increases or decreases in the carrying value are charged/credited to income. Break-up value of securities is calculated with reference to the net assets of the investee company as per the latest available audited accounts. Profit and loss on sale of investments is included in income currently. 5.5 Sale and repurchase agreements Securities sold subject to a repurchase agreement (repo) are retained in the financial statements as investments and the counterparty liability is included in borrowings from financial institutions. Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The difference between sale and repurchase price is treated as mark-up/return earned and expensed.

5.6 Operating fixed assets and depreciation Property and equipment, other than land which is not depreciated, are stated at cost or revalued amounts less accumulated depreciation. Capital work-in-progress is stated at cost. Cost of property and equipment of foreign branches includes exchange differences arising on currency translation at year end rates.

Depreciation on all property and equipment is charged using the diminishing balance method except for vehicles, computers and carpet which are depreciated using the straight line method in accordance with the rates specified in the fixed assets note. Depreciation on additions to property and equipment during a year is charged for the whole year while no depreciation is charged on property and equipment disposed off during a year. Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalised. Profit and losses on disposal of property and equipment are included in income currently. 5.7 Foreign currencies Assets and liabilities in foreign currencies have been translated into rupees at the rates of exchange approximating those prevailing at the balance sheet date except those covered by forward exchange contracts which are converted at contracted rates. Foreign bills purchased and forward exchange contracts other than those relating to foreign currency deposits are valued at the rates applicable to the respective maturities of relevant foreign bills purchased and foreign exchange contracts. Exchange gains and losses, except those mentioned in note 5.6, are included in income currently.

5.8 Revenue recognition Mark-up/interest on advances and returns on investment are recognised on an accrual basis except mark-up/interest on classified advanc which is recognised on receipt basis, in accordance with the Prudential Regulations issued by the State Bank of Pakistan. Commission income is recognised on receipt basis. Dividend income is recognised on declaration of dividend.

Financing method is used in accounting for income for lease financing. Under this method, the unearned lease income (excess of the su total lease rentals and estimated residual value over the cost of leased assets) is deferred and taken to income over the term of the lease so as to produce a constant periodic rate of return on the outstanding net cash investment in lease. Unrealised lease income is suspensed necessary, in accordance with the requirements of the State Bank of Pakistan. Gain/losses on termination of lease contracts, documenta charges and other lease income are recognised as income when they are realised. Front end fee is taken to income on a receipt basis. 5.9 Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents comprise of cash in hand and balances with other banks. 5.10 Related Party transactions For the purpose of ascertaining whether company is associated or not, companies where a director of the bank has been nominated as a director on behalf of the bank have not been considered as associated companies unless the bank has a shareholding in excess of twenty percent in that company or is able to exercise significant influence over that company. Banking transactions with related parties are carried out on commercial terms and conditions. 2001 (Rupees '000) 6. Cash and Balances with Treasury Banks In hand - local currency - foreign currencies In transit - local currency - foreign currencies With State Bank of Pakistan in Local currency current account Local currency deposit account Foreign currency deposit account With other central banks Foreign currency current account Foreign currency deposit account With National Bank of Pakistan in local currency PLS Short Notice Deposits 3,484,511 448,639 544,717 82,050

10,866,293 460 2,115,569

174,247 147,212 3,396,202 27,500 -----------------21,287,400 ==========

Deposits with State Bank of Pakistan are maintained to comply with their requirements issued from time to time. Deposits with other central banks are maintained to meet their minimum cash reserves and capital requirements pertaining to the foreign branches of the bank. 7. Balances with other Banks In Pakistan

- current account - deposit account

3,268 49,596 -----------------52,864

Outside Pakistan - current account - deposit account

1,988,776 1,033,823 -----------------3,022,599 -----------------3,075,463 ==========

Deposits represent foreign currency placements made with foreign banks 8. Lendings to Financial Institutions Call money lendings Repurchase agreement lending

8.1

9,044,643 6,425,876 -----------------15,470,519 ==========

8.1 Securities held as collateral against lendings to financial institutions

Held by bank

2001 Further given as collateral

Total

H b (Rupees '000)

Market Treasury Bills Pakistan Investment Bonds Federal Investment Bonds

5,525,876 600,000 300,000 -----------------6,425,876 ==========

---------------------==========

5,525,876 600,000 300,000 -----------------6,425,876 ==========

Note 9. Investments - net Held by bank

2001 Given as collateral

9.1 Investments by types: Available-for-sale securities

- Market Treasury Bills - Federal Investment Bonds - Pakistan Investment Bonds - Shares in Listed Companies - Shares in Unlisted Companies - NIT Units - Listed Term Finance Certificates - Prize Bonds

9.6

19,417,146 11,243,495 8,689,467 2,944,509 435,035 5,917 392,485 34,315 -----------------43,162,369

2,686,075 2,050,000 -----------------------4,736,075

Held-to-maturity securities - Federal Government Securities - Provincial Government Securities

1,363,056 75,965

---